Chewy is considered to be a trusted pet company for pet owners and parents who are designated in different places. There are many avenues of investment that the Chewy Company can take advantage of to grow its financial prospects. This paper delves into the investment opportunities that Chewy can consider while also looking at its key financial metric application. Analyzing financial metrics is critical in assessing the company’s financial health. Investment opportunities are also essential in promoting the company’s economic efficiency and effectiveness.
Chewy Company is well-known for its quality pet foods and items. The products and supplies provided by the business do not fully meet the needs of the pet industry, leaving room for expansion. Instead of only focusing on products, the company can work to provide pet services to pet lovers. It will help them tap into the service industry by delivering pet services such as grooming and training.
The company can also expand to international markets by providing its products and services to new countries apart from the United States. It would increase their sales revenue. The company can also invest in technology by making its services more personalized to customers. It would help enhance the customer experience, thus fostering customer loyalty. The company can also invest in establishing a brick-and-mortar strategy. The Brick-mortar is creating an online presence to reach out to the online market. It would enhance the company’s touchpoints, thus promoting customer satisfaction.
Chewy has the opportunity to engage in acquisitions and mergers to solidify its market position. Mergers and acquisitions contribute to increasing customer base and sales (Cumming et al., 2023). It also allows the business to enhance its capabilities and resources to become more sustainable. The business can merge with pet healthcare companies to provide its customers with veterinary services.
Most businesses today engage in environmental sustainability measures, allowing them to contribute positively to society (Feroz, Zo, & Chiravuri, 2021). Pollution is a bigger challenge for many businesses. Chewy can invest in establishing environmentally sustainable measures by working on its packaging products. The company uses plastics for packaging. They can work towards using more sustainable packaging products that are biodegradable. It would help in protecting the environment against plastic pollution. Investing in environmentally sustainable measures would also help the business to avoid lawsuits filed against it for environmental pollution.
NPV considers the net present value of cash inflows and outflows used for investment and discounted at a rate (Dai et al., 2022). Chewy can use NPV to invest in planning to develop operational plants in its newly expanded territories and streamline its operations. When the calculated NPV for Chewy is positive, it provides a good financial indication that the investment is adding value to the business, as opposed to when it is negative. A positive indicator shows that the investment has appreciated with time.
Internal Rate of Return (IRR) measures the profitability of investments (Dai et al., 2022). In a discounted cash flow, the NPV is zero, which is made up of the IRR discount. The calculation of IRR is the same as NPV. Chewy can use this financial metric by acquiring a new firm as its competitor to increase its market share. When the IRR investment is higher compared to the cost of capital of Chewy, it indicates that the investment is profitable. That means that the value of money generated by the company in terms of the investment is greater compared to the cost used by the business to finance it. That makes it a good investment for the industry to venture into because of the financial profitability gained.
The payback period considers the number of years a company gains back the money it used for investment (Dai et al., 2022). Chewy can use this method to invest in new technology that allows it to reach out to a wide market audience and also enhance customer experience. The shorter the period length to gain the investment money, the more profitable an investment is using this investment metric.
The three financial metrics provide the company with a good investment opportunity. The payback method can allow the Chewy Company to benefit from a low investment while improving profitability. As a result, the company can increase its sales revenues and attract more customers. The IRR would allow the business to expand while limiting its financial risks. As a result, Chewy will benefit from increasing its distribution networks. NPV will provide the company with an opportunity to develop and expand its market base, profiting financially.
Cumming, D., Jindal, V., Kumar, S., & Pandey, N. (2023). Mergers and acquisitions research in finance and accounting: Past, present, and future. European Financial Management, 29(5), 1464-1504. https://onlinelibrary.wiley.com/doi/full/10.1111/eufm.12417
Dai, H., Li, N., Wang, Y., & Zhao, X. (2022, March). The analysis of three main investment criteria: NPV, IRR, and payback period. In 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022) (pp. 185-189). Atlantis Press. https://www.atlantis-press.com/proceedings/icfied-22/125971510
Feroz, A. K., Zo, H., & Chiravuri, A. (2021). Digital transformation and environmental sustainability: A review and research agenda. Sustainability, 13(3), 1530. https://www.mdpi.com/2071-1050/13/3/1530