1 Growth Stock Down Nearly 50% to Buy Right Now

Despite putting up solid growth metrics, it's been a tough stretch for Chewy (NYSE: CHWY) stock. The e-commerce company specializing in pet food and supplies has seen its stock cut in half from its 52-week high, and its shares are down around 20% in 2026 alone.

However, this sell-off could be a nice buying opportunity for investors.

Image source: Getty Images.

A defensive gem

Chewy operates one of the more defensive concepts in retail. The bulk of its sales comes from pet food and other essential pet supplies that are automatically shipped to its customers on a regular basis. A whopping 84% of its sales come from customers who use its autoship feature, although that does include some non-autoship sales from these customers.

These types of defensive retail stocks that mostly sell necessities generally tend to trade at premium valuations. However, Chewy's valuation greatly trails many peers that would fit into this category, such as Walmart, Costco, and Tractor Supply Company. Trading at a forward P/E of just 16.5 times next fiscal year analyst estimates, the stock is very attractively valued, especially in relation to other retail staples.

CHWY PE Ratio (Forward) data by YCharts

Meanwhile, Chewy has been growing both revenue and profits at a nice pace. While the company will report its fiscal fourth quarter results later this month, it has grown revenue by more than 8% each quarter this past fiscal year, including 8.3% last quarter. The growth is led by its autoship customers, whose spending is up 16% over the past year. The company has grown its active customer base, while spending per active customer has risen to nearly $600 a year.

Chewy has also leaned into initiatives to help improve its margins and deliver operating leverage. This includes introducing a paid membership program with perks, introducing more private label brands, pushing more into the pet pharmacy business, automation, and growing its sponsored ad business.

These actions helped lead to a 50 basis point increase in gross margin in fiscal Q3 to 29.8%, and for its EBITDA (earnings before interest, taxes, depreciation, and amortization) margins to expand by 100 basis points to 5.8%. Meanwhile, between its strong sales and margin expansion, its adjusted EPS (earnings per share) soared from $0.12 a year ago to $0.32 in fiscal Q3.

While Chewy does show some signs of maturing as new user growth slows, the company is still seeing solid overall sales growth. Meanwhile, it looks like it is on the path to achieving its 10% EBITDA margin goal in the coming years, as it continues to become more efficient and experience revenue growth from higher-margin businesses.

Between its growth, margin improvement, highly recurring revenue model, and valuation, Chewy is one of the best bargains currently in the market.

Geoffrey Seiler has positions in Chewy. The Motley Fool has positions in and recommends Chewy, Costco Wholesale, Tractor Supply, and Walmart. The Motley Fool recommends the following options: short April 2026 $55 calls on Tractor Supply. The Motley Fool has a disclosure policy.