As the macroeconomic uncertainties and the possibility of a recession continue to hurt investors’ sentiments in 2023, many TSX growth stocks have witnessed massive value erosion. Although it’s natural for new investors to be worried about their investments in such turbulent market conditions, they must remain focused on a long-term approach to expect healthy returns on their investments. This is because volatility is a part of the stock market, and by keeping a long-term perspective, investors can navigate short-term turbulent times and capitalize on attractive buying opportunities in growth stocks.
In this article, I’ll highlight one such top Canadian stock, Aritzia (TSX:ATZ), and tell you why buying this beaten-down growth stock right now could help you get solid returns in the long run.
Aritzia stock
Aritzia is a Vancouver-based integrated design house that sells its everyday luxury clothing lineup through its online store and a large network of boutiques in Canada and the United States.
After rallying by more than 300% in the previous four years, ATZ stock turned negative in the calendar year 2022, as the dimming macroeconomic outlook started affecting consumer spending behaviours, also trimming the company’s profitability. For example, Aritzia’s adjusted net profit margin contracted to 9.8% in its fiscal year 2023 (ended in February 2023) from 11.8% in the previous fiscal year. This could be one of the key reasons why this growth stock has lost nearly 51% of its value in the last year to currently trade at $24.60 per share with a market cap of $2.7 billion.
Why this TSX growth stock looks attractive to buy now
It’s important to note that when we analyze growth stocks to invest in, we should ideally pay more attention to their revenue growth than their current profitability. While profitability is important, consistent revenue growth is usually considered a better indicator of a growth company’s potential for long-term success. And this is true in the case of Aritzia, which is currently reinvesting profits to expand its e-commerce segment and retail presence in the United States market.
In its fiscal year 2023, Aritzia’s total revenue rose 47% YoY (year over year) to $2.2 billion. More importantly, its revenue in the United States jumped 66% YoY, which accounted for more than 50% of its total sales. While the worsening consumer spending environment has led to a decline in its sales growth rate in the first half (ended in August) of its fiscal year 2024, its total sales still grew positively by about 7% during that period.
Even amid the challenging market environment, Aritzia’s management remains focused on investing in business scalability to prepare “for the next phase of expected growth.” Considering that, its financial growth could accelerate significantly in the long run.
On the macroeconomic side, I expect the consumer spending environment to also improve in the coming years as the latest round of interest rate hikes seems to be nearing its end. These positive factors make ATZ a really attractive growth stock to buy for the long term. While it’s nearly impossible for anyone to predict when that expected handsome recovery in ATZ stock will start, given its solid growth outlook, you may not want to miss buying this amazing TSX growth stock when it looks undervalued.
