Chewy, Inc. (CHWY) stock intrinsic value fair value estimate & owner earnings analysis

Chewy is an online retailer of pet food, supplies, medications and health services, with fulfillment centers in the United States and Canada. Its core is the Autoship subscription program: Autoship customers accounted for 83.3% of net sales ($10.5 billion) in the fiscal year ended February 1, 2026, and grew 11.8% in that year. Active customers reached 21.3 million (up 4.0%), and net sales per active customer rose 2.2% to $591. Net sales were $12.6 billion, up 8.3%. How we measured earnings. We start from cash generated by operations and remove the effect of working-capital swings, then deduct share-based compensation in full (it is a real cost to shareholders even though it is not paid in cash) and deduct only the capital spending needed to maintain the business, treating a small portion of spending as growth investment. On that basis, earnings per diluted share were negative in fiscal 2019 through 2022 (about -$0.60, -$0.35, -$0.44 and -$0.11) while the company scaled up, then turned positive: about $0.03 in fiscal 2023, $0.29 in fiscal 2024 and $0.66 in fiscal 2025. Fiscal 2025 included a working-capital drag of $4.2 million and a $34 million reduction in lease obligations; fiscal 2024 net income was inflated by a one-time $257.5 million tax benefit, which does not affect our cash-based figure. The starting level. Because the business only became reliably profitable recently, we use only the two most recent years (fiscal 2024 and fiscal 2025) and take their midpoint of about $0.47 per share, rather than the higher fiscal 2025 figure alone. The most recent fiscal year grew from $0.29 to $0.66; our first-year growth assumption in the base case is 4%, well below that, so no reversal of a slowdown is being assumed. The first half of fiscal 2026 (through August 2, 2026) showed operating cash flow of $245.9 million versus $220.3 million a year earlier and net income of $175.3 million versus $124.4 million, which is consistent with the level holding, but is not used to raise it. Base case, about $9.30 per share. Earnings grow 4% a year at first, tapering to zero by year 9. We credit this because active customers have been growing about 4% a year, Autoship is a recurring-revenue mechanism covering more than 80% of sales, and customer growth has continued through fiscal 2025. After year 10 we assume the earnings level simply persists, with no further growth, because the recurring subscription base is the named reason it endures. We do not credit margin expansion, the Canadian launch of 2023, or new services, since these have not yet produced proven earnings. Bear case, about $3.50 per share. Earnings fall back to the fiscal 2024 level of about $0.29 and stay there for ten years, then erode 5% a year. This reflects how thin the cash earnings still are after stock compensation: fiscal 2023 was only $0.03, so a small margin squeeze from competition in pet retail or higher fulfillment costs can wipe out much of the profit. Bull case, about $15.30 per share. Earnings start from the fiscal 2025 level of $0.66 and grow 6% a year, tapering to 2% by year 10, roughly matching the combination of customer growth (4%) and higher spending per customer (2.2%) achieved in fiscal 2025, and then persist at that level. This case needs no new products; it only requires the demonstrated trends to continue. Other points. Share-based compensation was $297.9 million in fiscal 2025 (about 2.4% of sales) and is fully charged here. Diluted shares have fallen from 431.0 million to 425.8 million, helped by a $500 million repurchase program authorized in May 2024. The valuation would be wrong if the fiscal 2025 profit margin proves to be a peak, or if the Autoship base loses customers to larger competitors.