One of the top stocks over the last few years certainly should include Aritzia (TSX:ATZ). The retail company saw a huge surge during the pandemic, with a sudden interest coming from the United States. Shares surged to all-time highs but have since come back down to earth.
In fact, Aritzia stock is now down 14% in the last year. That being said, shares are now up 67% since bottoming out in November. With that in mind, here are three things that investors may want to consider when it comes to Aritzia stock.
Strong growth potential
Right now isn’t a great time for Aritzia stock. The company has clearly been hit by a rise in interest rates on the one hand and inflation on the other. Yet overall, this company has a clear path for even more growth potential in the future.
First off, let’s look at the company and its path through expansion. The company has increased its online presence in recent years, with new stores specifically in the United States. This has helped contribute to revenue and earnings growth. It also maintains strong brand loyalty, especially among young women, which will continue to be a huge earnings stream. Plus, the stock differentiates itself as a premium brand with comfortable, stylish designs.
Furthermore, the company has maintained strong performance even in all this turmoil. Aritzia stock has averaged 20.8% earnings growth over the past few years. This passes the industry average of 18.2% for specialty retail. Earnings per share (EPS) growth is forecasted to hit 51.2% as well in the coming year. Therefore, investors should see profit per share rise significantly.
Trading below fair value
With all this future focus, let’s talk about the company’s valuations at these levels. Analysts believe the Aritzia stock could now be undervalued, even with the price increase over the last few months. Some suggest that the stock could be anywhere between 3% and 10% below fair value at these levels.
While it may not surge and double to around $60 per share, the company does have room for growth. Once economic headwinds are out of the way, the stock has room to run over the next year. With more cash on hand, consumers will likely return to spending. And that would mean going to a strong brand such as Aritzia stock.
But there’s one thing to note
While all this looks like great news, there is one thing to note, and that’s insider selling. While it hasn’t been a lot, there have been two insiders selling Aritzia stock over the last three months. This has totalled 10,000 shares. Over the last year, there have been five sell transactions, totalling 40,325 shares.
That being said, there have also been buys, with three totalling 285,300 shares. These are important to note because it looks like some people might need the cash, while others are seeing today’s share price as an opportunity.
A sale could show signs of concern, with private information leading some to believe the stock has given all it can. Or, at the very least, it could signal potential short-term volatility. However, the fact there are far more buys than sales should be a positive sign for those willing to stick it out.
So, if you’re looking for long-term growth, Aritzia stock is certainly a great one to consider. But if you’re hoping for a quick surge like we’ve seen with some other stocks, I’d say you’re barking up the wrong tree.
