We all know that the main goal of investing is to find stocks to buy when they are low and then eventually sell them when they are high. However, while stocks that offer tremendous value look like some of the best to buy, you don’t want to invest in just any company because it is cheap.
It’s essential that investors still do their homework to ensure that the stock is not only a safe investment but also has plenty of long-term potential to continue growing.
Any stock can become cheap. But when you buy lower-quality companies that are trading cheaply, there is a possibility that they may never recover, or it will take years for them to turn their business around.
If you focus on finding a high-quality stock with significant long-term growth potential, trading cheaply, though, you not only have the potential to earn spectacular gains as it recovers in price, but you could also see years of gains from the growth it offers.
That’s precisely why Aritzia (TSX:ATZ) stock is one of the best value stocks on the market today and a no-brainer buy for anyone looking to take advantage of the current market environment.
Aritzia is one of the best value stocks to buy now
If you’re unfamiliar with Aritzia, it’s a rapidly growing women’s fashion company with boutiques all across Canada and the U.S.
The company aims to make high-quality but also affordable fashion for women that is better than fast fashion alternatives but more affordable than true luxury goods.
This is a strategy that has worked well and resonated with consumers for years. And the more popular Aritzia continues to become, the faster it can grow its operations.
In fact, in the last five years alone, including through the pandemic, Aritzia’s sales have grown from $743 million to roughly $2.2 billion, an increase of more than 195% in half a decade. That’s impressive growth for any business, especially a retailer, through the pandemic years.
In addition, on top of its revenue growth, Aritzia’s normalized earnings per share have increased over that stretch from $0.65 to $1.86, an increase of 186% in five years.
Aritzia has managed to achieve this impressive growth for multiple reasons. First off, the company has been focused on ensuring a high-quality e-commerce platform for years, particularly before the pandemic. This has been crucial and helped Aritzia to weather the storm much better during all the store closures and stay-at-home orders.
In addition, Aritzia has also leveraged the power of influencer marketing to help drive demand for its products.
Another major factor is its continuous investments in opening new boutiques. The company already has numerous stores across Canada, so in recent years, the majority of new openings have taken place in the United States, making its brand more popular and leading to a rapid increase in sales.
So why, if Aritzia is such an impressive growth stock, does it trade more than 50% below its all-time high?
Why is Aritzia so cheap?
Aritzia has quickly become one of the best value stocks to buy because of the short-term headwinds it faces, particularly in the current economic environment.
With interest rates continuing to rise and many in North America still feeling the effects of surging inflation rates last year, many economists and investors expect that discretionary spending could temporarily dip.
This is leading Aritzia stock to trade well undervalued. And while these risks are certainly important and could impact the retailer in the near term, over the long term, Aritzia still has a huge runway for growth, especially south of the border.
Therefore, while ATZ is trading so cheaply, it’s easily one of the best stocks you can buy. Right now, Aritzia trades at a forward price-to-earnings ratio of 23.2 times, well below its three-year average of 30.5 times and towards the bottom of its historical range of 19.1 to 46.1 times.
Furthermore, if you compare this to its expected earnings next year, when analysts expect the retailer to recover, Aritzia is trading at an attractive 13.3 times earnings.
Therefore, while this impressive growth stock is offering such a significant discount, it’s easily one of the best value stocks that investors can buy today.
