Why Canada Goose Holdings Inc. Is Soaring Over 10%

Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS) is up over 10% following its Q2 2018 earnings release. Should you buy now? Let’s find out.

| More on:

Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS), one of the world’s leading makers of performance luxury apparel, released its fiscal 2018 second-quarter earnings results this morning, and its stock has responded by soaring over 10% in early trading. Let’s break down the quarterly results to determine if the stock could continue higher from here and if we should be long-term buyers today.

The results that ignited the rally

Here’s a quick breakdown of 12 of the most notable financial statistics from Canada Goose’s three-month period ended September 30, 2017, compared with the same period in 2016:

Metric Q2 2018 Q2 2017 Change
Wholesale revenue $152.07 million $122.44 million 24.2%
Direct-to-Consumer (DTC) revenue $20.26 million $5.50 million 268.4%
Total revenue $172.33 million $127.94 million 34.7%
Gross profit $87.09 million $59.33 million 46.8%
Gross margin 50.5% 46.4% 410 basis points
Operating income $48.23 million $27.67 million 74.3%
Operating margin 28.0% 21.6% 640 basis points
Adjusted EBITDA $46.40 million $33.79 million 37.3%
Adjusted EBITDA margin 26.9% 26.4% 50 basis points
Income before income taxes $44.64 million $25.23 million 76.9%
Adjusted net income $32.88 million $23.74 million 38.5%
Adjusted net income per diluted share (EPS) $0.29 $0.23 26.1%

Updated outlook on 2018

As a result of the company’s “stronger than expected” growth, it raised its full-year outlook on fiscal 2018. Here’s a breakdown of its new outlook compared with its previous one:

Metric New Outlook Previous Outlook
Annual revenue growth At least 25% Mid to high teens
Adjusted EBITDA margin expansion At least 50 basis points Flat to modestly expanding
Annual growth in adjusted EPS At least 35% Approximately 20%

What should you do with Canada Goose now?

It was a phenomenal quarter overall for Canada Goose, and it posted very strong results for the first half of the fiscal year, with its revenue up 39.6% to $200.54 million, its gross profit up 56.8% to $100.34 million, and its adjusted EPS up 28.6% to $0.18 compared with the first half of fiscal 2017. The company’s second-quarter adjusted EPS also crushed the consensus estimate of analysts, which called for $0.21, so I think the market has responded correctly by sending its stock soaring. Furthermore, I think the stock could continue higher from here, because I think investors will continue to pile in to gain exposure to one of North America’s fastest-growing brands.

Canada Goose’s stock has rallied more than 30% since I first recommended it in August following its first-quarter earnings release and more than 16% since October 4, and I think it still represents a great long-term investment opportunity, so take a closer look and consider beginning to scale in to a position today.

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 Joseph Solitro has no position in any stocks mentioned.

More on Investing