Aritzia (TSX:ATZ) shares spiked this week as the company came out with earnings that went far beyond analyst estimates. Yet Aritzia stock remains far below its all-time highs and, indeed, its 52-week highs.
Today, let’s look at whether the stock is considered a buy or if this is as high as it can get for now.
What happened?
In Aritzia’s third-quarter results, the stock reported not just financial improvements but hope for the future as well. There was a lack of product innovation, however, but this, along with same-store sales, should increase coming into full-year 2025. And that should not just hit historic levels but surpass them.
What analysts question is whether the company can achieve the results it received back in 2021 and 2022. If so, shares could certainly get back to the attention of investors, making shares perhaps double in price!
For now, though, let’s look at earnings to see how Aritzia stock has been shifting and how long investors will have to wait to see a turnaround.
Earnings come in
During the third-quarter results, Aritzia stock reported revenue of $654 million, up 5% year over year. This beat out earnings estimates, along with same-store sales growth of 0.5%, rather than a decline. Earnings per share (EPS) hit $0.47, which was a fall of 30% compared to 2023 levels yet still beat out estimates!
These were some strong results, given that United States store openings slowed down considerably due to a lack of customer interest. Yet that trend seems to be shifting back to positive, which could bring in considerable growth for the stock in 2024.
Other positive takeaways included same-store sales growth of 23.3% year over year, and the company remains on track to create more product innovations for full year 2025. Add on new store openings, and 2024 and 2025 could be strong years for the stock.
Guidance increases
Management increased the company’s guidance for the full year of 2024, which analysts actually pegged as conservative. Revenue growth should increase by 100 basis points, though gross profit margins remain unchanged. EPS could also increase, with shares likely to increase right alongside earnings.
As the company continues to open up stores once more across the U.S. as well, more exposure should certainly help keep growth coming in. Meanwhile, the stock continues to support an EPS compound annual growth rate (CAGR) of 23.5% over the last five years!
Should investors consider Aritzia stock after these earnings, even as shares edge closer to $35? I would say absolutely. The company has gone through trials and tribulations and come out the other side. Now that it’s looking to create even more U.S. store openings — where 50% of revenue comes from — there is certainly more growth on the way, especially in a bull market.
For now, shares trade down 43% in the last year, with a 23% increase after earnings this week. Meanwhile, it remains financially strong, trading at 11.31 enterprise value over earnings before interest, taxes, depreciation and amortization. All in all, Aritzia stock remains a strong company with innovation, store openings, and more share growth on the way.
