TFSA Investors: A Great Stock to Buy With Double-Digit Growth

Aritizia Inc’s (TSX:ATZ) stock is expected to outperform the TSX Index in 2019. Strong third-quarter earnings make it a top pick for your TFSA.

| More on:

Canadian investors can now tuck away up to $6,000 a year in their Tax-Free Savings Account (TFSA). The TFSA remains one of the most powerful tools available to investors. You can grow your investments tax-free and can withdraw at any time without penalty.

What should you do with your $6,000 limit in 2019? Consider adding Aritzia (TSX:ATZ) to your portfolio.

A top growth stock

Aritzia is a new player to Canada’s retail sector. The company began trading on the TSX in October of 2016 and got off to a rough start. After coming up short in 2017, its stock dropped almost 45% a year after its IPO. This past year, however, was a different story.
The company came roaring back and was one of the best-performing stocks in 2018. Its stock rose almost 30% on the back of earnings outperformance. It topped analysts’ expectations in each of the first two quarters of fiscal 2019.
 
Through 2021, analysts are expecting the company to grow revenue by 15% annually, and earnings are expected to jump by an average of 20%. This is in line with the company’s own internal guidance of mid-teen growth through 2021. In the retail space, this type of growth is tough to come by.

Aritzia’s 2019 third-quarter earnings

Yesterday, the company posted fiscal third-quarter 2019 results that once again topped expectations. Earnings per share jumped 16% year over year, and revenue climbed by 18.8% over the third quarter of fiscal 2018. 

More impressively, same-store sales grew by 12.9%. This is a very important metric for the retail sector. It also marked the 17th consecutive quarter of same-store growth. It opened two boutiques in the quarter and each new store in 2019 is performing at or above expectations.

Approximately 40% of the company’s growth came from south of the boarder, a key growth market. In 2020, the company expects to open a record number of boutiques (six) in the United States.
The only cause for concern was a 170-basis-point drop in gross margins. This was due in large part to a stronger U.S. dollar and higher raw material costs. Overall, it was another strong quarter for the company, and its outlook looks bright. 

A value stock

Despite double-digit growth, Aritzia’s stock price is still trading approximately 12% below its IPO price. Trading at only 17 times earnings, the company provides decent value. It also has a P/E to growth ratio of 1.16, which is low for a stock that is growing at a 20% rate. 

Analysts are bullish on the stock. All nine covering the stock rate it a “buy,” and they have a one-year average price target of $21.50. This implies 30% upside from today’s price. The lowest price target is $20, which is still 21% above where it currently trades.

Foolish Takeaway

Aritzia’s status as a growth stock makes it a perfect addition to an investor’s TFSA. It has worked through its post-IPO woes and has outperformed expectations. With a minimum 20% upside from today’s price, Aritzia provides excellent value. 

More on Investing

dividend stocks are a good way to earn passive income
Dividend Stocks

This Canadian Stock Is Down 31% and Nearly Perfect for Long-Term Investors

Here's why this reliable Canadian stock with a dividend yield of more than 4.2% is one of the best long-term…

Read more »

dividends grow over time
Tech Stocks

1 Standout Growth Stocks Worth Buying Today and Holding for the Long Haul

If you don't mind being a little contrarian, you can pick up high-quality growth stocks at modest valuations. Here's one…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Tech Stocks

Where to Invest Your $7,000 TFSA Contribution

Got $7,000 in TFSA room? Shopify stock could be your best long-term bet. Here's why this Canadian commerce giant is…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

4 Top Dividend Stocks Yielding More Than 3.5% to Buy for Passive Income Right Now

These four top dividend stocks are ideal for boosting your passive income right now.

Read more »

woman considering the future
Retirement

The Average TFSA Balance at 55 — and How to Improve Yours

Improve your TFSA balance by aiming to maximize your contributions each year and investing for long-term growth.

Read more »

coins jump into piggy bank
Dividend Stocks

Have $21,000 in TFSA Room? Here’s a Dividend Stock Worth Considering

Enbridge is a dependable dividend stock for TFSA investors. See why its stability, income potential, and growth make it a…

Read more »

ETF is short for exchange traded fund, a popular investment choice for Canadians
Stocks for Beginners

3 Canadian ETFs Worth Tucking Into a TFSA and Holding for the Long Haul

Use your TFSA for long-term, tax-free compounding and fill it with high-quality, low-cost ETFs you can hold through market cycles.

Read more »

rising arrow with flames
Stocks for Beginners

A Scorching-Hot Stock Worth the Growth Jolt

This red-hot TSX stock is surging fast -- and its growth story may still be in its early innings.

Read more »