For years now, Aritzia (TSX:ATZ), the rapidly growing women’s fashion retailer, has been one of the most exciting stocks on the TSX.
Its rapid and consistent growth has resulted in Aritzia trading at a growth premium, which has created a tonne of volatility for the stock, especially as market conditions are changing.
After an impressive and significant rally dating back to before the pandemic, Aritzia stock sold off significantly in late 2022 and 2023 as the economy began to worsen.
Now, however, Aritzia stock looks as though it’s back on track. Since reporting earnings in early January, the stock has gained more than 40%.
So, if you’re interested in Aritzia stock, here are five crucial facts to know before you consider an investment.
Aritzia stock has proven it can grow sales at an impressive pace
As I mentioned above, Aritzia is one of the most exciting stocks to watch because it has a long track record of rapidly growing both its sales and profitability.
From its fiscal 2017 year through to fiscal 2023 Aritzia stock saw its revenue grow from $667 million to just shy of $2.2 billion. That’s an incredible 229% increase in sales in just six years.
Furthermore, throughout that stretch, Aritzia also increased its adjusted earnings per share (EPS) from $0.55 to $1.86, a 238% increase.
Aritzia continues to have significant growth potential in the coming years
Although Aritzia stock has already grown its sales and profitability considerably, if you’re worried that you missed your opportunity to invest in Aritzia then fear not, because it still has a plenty of growth potential.
Right now, the company still has more stores in Canada than it does in the U.S., despite the States having roughly nine times the population of Canada. So, there is considerable growth potential in the United States alone.
Furthermore, Aritzia has had an impressive e-commerce platform for years now, which has been key for its business, both driving new sales, and also growing its brand recognition.
The worst looks like it’s behind Aritzia
Although Aritzia stock is an impressive business that’s proven it can consistently design new products that resonate with consumers, the stock was impacted significantly through the end of 2022 and 2023.
Not only did inflation increase the expenses for Aritzia, but with consumers also impacted by the rising cost of living, there was concern that Aritzia could see a significant hit to its sales.
That never quite materialized, and with Aritzia now looking like it has weathered the storm and is finding new cost-saving initiatives, the stock has turned the corner and started to rally significantly.
Since its earnings report for the third quarter of fiscal 2024 results in early January, Aritzia’s share price has appreciated by roughly 43%.
Analysts are increasing their target prices for Aritzia stock
With Aritzia’s operations trending back in the right direction and the stock now seeing a significant rally, analysts have been re-rating the stock higher, which is a positive sign for investors.
Last week, an analyst in the US increased the target price from $39 to $50. Meanwhile, this morning, analysts at TD Bank in Canada increased their target price from $34 to $45.
Aritzia stock still offers value even after its recent rally
Despite the impressive rally Aritzia stock has seen over the last month, investors can still buy the stock today while it’s undervalued.
At the moment, analysts are expecting Aritzia’s adjusted EPS for fiscal 2025 will be $1.81. Plus, this could end up coming in higher as Aritzia is in the midst of finding efficiencies in its operations and investing in cost-saving initiatives.
Though even if earnings were to come in at $1.81, that would give Aritzia a forward price-to-earnings (P/E) ratio of just 21.2 times today.
And when you compare that to Aritzia’s five-year average forward P/E ratio of roughly 36 times, it’s clear just how cheap it is today, especially for such a high-potential growth stock.
So, if you’re considering adding Aritzia stock to your portfolio, the good news is that it’s still cheap today, and as a long-term investment, it has significant growth potential.
