Canada Goose Holdings Inc (TSX:GOOS): 3 Big Risks to Monitor

Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS) stock has performed incredibly well. There’s reason to believe more upside is ahead, but you’ll want to monitor these key risks.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In March I highlighted how Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS) stock could double in price. But just because it’s possible doesn’t mean that there won’t be hurdles along the way.

Now trading at 48 times trailing earnings, the stock market is betting heavily that Canada Goose will execute. If the company stumbles, the valuation multiple will undoubtedly compress, potentially leading to 50% downside or more.

While I continue to believe in the company’s future, every Canada Goose investor will want to monitor these three risks.

Global expansion efforts

One of the biggest growth stories for Canada Goose lies is its opportunity to tap global markets. Impressively, 52 out of every 1,000 Canadians own a Canada Goose jacket. That’s an unheard level of penetration, one that is unmatched by nearly any other high-end brand.

The company’s penetration internationally, however, leaves plenty of room for growth.

In Japan and South Korea, for example, only 10 people in a thousand own a Canada Goose jacket. In the U.S. and Europe, the figure is only five to six people out of every thousand. In China, only 0.1% of the population owns a Canada Goose jacket.

Replicating its success in Canada won’t be easy, however, especially with trade wars threatening Canada’s exports. By the end of this year, expect to see improvements on the penetration rates listed above.

Customer retention rate

Another metric that Canada Goose touts is its “intent to repurchase” rate. According to the company, 84% of its customers intend to purchase another Canada Goose item the next time they’re shopping for a high-end jacket.

As I wrote in March, “For every new customer, the company can expect a lifetime of purchases that total well into the thousands of dollars.” That will only be true if the 84% customer retention rate holds as the company continues to expand.

Watch for this metric during the next annual earnings released. If it stays above 80%, that would be quite a feat. If the company fails to report the figure, the stock market may be overestimating the company’s true brand power.

Valuation

Canada Goose stock is expensive, but for good reason.

This year EPS should come in around $1.30. Over the next five years, Wall Street expects EPS to grow by more than 25% per year. If that happens, EPS would surpass $4.00 per share by 2024.

If the current valuation multiples hold, Canada Goose stock could return more than 300% over the next few years. As the company grows larger, however, it will become more difficult to maintain this breakneck pace.

Over the next couple of years, I would expect the stock’s valuation of 48 times earnings to compress. It won’t collapse completely as the underlying business still has plenty of room to run, but even a multiple of 30 times earnings, it’s  pricey given that it represents a 50% premium versus the market.

If the company executes in the years to come but its valuation multiple remains sky-high, it’s likely time to take profits. Always keep in mind that investments pay off not only in the cash flows they produce, but also in the price that other investors are willing to pay.

Should you invest $1,000 in Canada Goose Holdings right now?

Before you buy stock in Canada Goose Holdings, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Canada Goose Holdings wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

money goes up and down in balance
Dividend Stocks

Invest $25,000 in These Dividend Stocks to Combat Currency Fluctations

These dividend stocks could turn a $25,000 investment into a huge income stream – and help battle ongoing volatility.

Read more »

exchange traded funds
Dividend Stocks

I’d Invest $12,000 in These 3 High-Yield Dividend ETFs for Passive Income

Market turbulence? Sleep easy with these three high-yield dividend ETFs that provide steady monthly income while you wait for recovery.

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

How I’d Use $15,000 in 3 Monthly Dividend Stocks for Consistent Income Potential

Monthly dividend-paying stocks like Peyto Exploration and Development offer generous yields and strong growth prospects.

Read more »

A worker gives a business presentation.
Dividend Stocks

Where I’d Allocate $10,000 in Dividend Stocks for Decade-Long Appreciation

Here are two TSX dividend stocks I’d buy for long-term capital gains and dividend income if I had $10,000 to…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Can the Maximum TFSA Room Keep Up With Inflation?

Just because you want to make major gains in a TFSA during inflation doesn't mean making risky investments.

Read more »

A microchip in a circuit board powers artificial intelligence.
Tech Stocks

The 1 Canadian Stock I’d Buy and Hold Forever for AI Exposure

This Canadian stock may not be the first you think of when hearing "AI stock," but it should be.

Read more »

investor looks at volatility chart
Investing

3 Stocks Down More Than 25% to Buy During the Market Volatility

These three stocks have become ultra-cheap in the current market environment, making them some of the best investments to buy…

Read more »

hand stacking money coins
Dividend Stocks

RRSP Investors: 2 TSX Stocks With High Dividend Yields to Consider Now

These TSX stocks now offer dividend yields above 6%.

Read more »