Shares of e-commerce pet food and supplies retailer Chewy (CHWY, Financial) surged by 10.87% today, reflecting a positive response from investors after the company revealed its second-quarter earnings. The remarkable earnings report exceeded Wall Street's expectations in terms of revenue, active customers, and EPS, driving the stock price to $28.67.
Chewy (CHWY, Financial) also demonstrated improved financial health with an increase in its EBITDA margin year-on-year, and a notable improvement in free cash flow. One of the highlights from the earnings report was the improved monetization, as net sales per active customer reached a record $565.
From a valuation perspective, Chewy is currently trading at a P/E ratio of 150.89, with a market capitalization of $12.50 billion. Despite some medium warning signs like its PS ratio being close to a 1-year high, and asset growth outpacing revenue growth, the company shows strong financial health. The Altman Z-Score of 5.48 and the Piotroski F-Score of 7 indicate a solid financial standing.
Moreover, Chewy benefits from a strong GF Value rating, indicating that the stock is significantly undervalued with a GF Value of $42.63 compared to the current market price. This suggests a potential upside for investors. Additionally, the company has a high level of free cash flow, with a TTM FCF margin of 2.39% and a TTM FCF per share of $0.62.
However, investors should be mindful of some red flags. Chewy has shown a negative net current asset value of -$0.99 and has EBITDA growth challenges, as indicated by an ebitda growth rate of just 0% over the past year. Also, insider selling activities have been noted with no insider buying over the past three months.
In summary, Chewy (CHWY, Financial) has showcased a strong quarterly performance, driving significant stock price appreciation. With robust financial health and considerable GF Value upside, it remains an attractive investment option, albeit with certain risks that investors should consider.
