Market fluctuations can present investors with unique opportunities to scoop up high-quality growth stocks at discounted prices. Sometimes, even the highest-quality growth stocks may experience temporary setbacks or headwinds, causing their stock prices to decline for brief periods.
And while these uncertain environments can be disconcerting, the short-term impacts to a high-quality growth stock’s price will often create attractive entry points for long-term investors seeking to capitalize on the potential of these stocks. In fact, there are numerous Canadian growth stocks that are trading unbelievably cheap today.
So, if you’re searching for a high-potential investment, while many stocks are currently trading undervalued, here’s why Aritzia (TSX:ATZ), the fashion retailer, is one of the best Canadian growth stocks to consider now.
Aritzia is consistently growing both its sales and profitability
Despite the fact that many consumer discretionary stocks are selling off, and many expect discretionary consumption to slow in the current economic environment, Aritzia has continued to post impressive growth in both its sales and its earnings.
From 2017 to 2022, the Canadian growth stock increased its sales from $667 million to $1.5 billion. Furthermore, over the last 12 months, its sales have exceeded $2 billion.
In addition, Aritzia has increased its profitability from a net loss of more than $50 million in 2017 to roughly $157 million of net income in 2022. And over the last 12 months, it’s reported roughly $185 million in earnings.
Not only has Aritzia stock continued to see its business expand successfully for years, including through the pandemic, but it’s also continued this exceptional growth rate over the last year, as inflation has skyrocketed, and many have been fearing a recession.
This just goes to show what a popular business it is and how well its products resonate with consumers. And going forward, Aritzia continues to have tonnes of growth potential, particularly south of the border.
Right now, the majority of its boutiques are still in Canada, despite the U.S. having nine times the population size. So, while it continues to open new locations south of the border, it has tonnes of long-term growth potential.
However, even with its impressive performance as well as its incredible growth potential, over the last five months, the stock has continued to sell off along with many other consumer discretionary stocks.
This high-quality growth stock looks ultra cheap
With Aritzia selling off in recent months, as the both the economic and market environments continue to experience uncertainty, the stock has become ultra-cheap and now offers investors an excellent entry point.
For example, as of writing, Aritzia’s forward price-to-earnings (P/E) ratio is 19.3 times. That’s the lowest it’s been in the last two-and-a-half years since its recovery from the initial pandemic selloff. It’s also well below its average forward P/E ratio over that stretch of 31.6 times.
And on top of the fact that Aritzia is trading ultra-cheap, analysts expect another 15% growth in revenue each of the next two years. Meanwhile, its normalized earnings per share are expected to grow over 18% next year and another 28% in fiscal 2025.
So, while this high-quality growth stock is trading undervalued and offering investors a significant bargain, it looks like one of the top stocks to buy now.