Investing $5,000 in high-quality growth stocks can help build long-term wealth, thanks to their ability to deliver above-average returns. The smartest growth stocks are backed by companies with a solid record of revenue growth, strong earnings, and the ability to scale efficiently. These Canadian stocks could generate significant returns over time.
Against this background, here is the smartest growth stock to buy with $5,000 right now.
Source: Getty Images
The smartest growth stock: Aritzia
Canadians looking for the smartest growth stock could consider Aritzia (TSX:ATZ). The Canadian fashion retailer has been consistently delivering solid growth led by strong demand for its products, its ability to add newness to its offerings, and its loyal customer base.
Aritzia reported a 32% year-over-year increase in revenue in the last reported quarter, supported by broad-based momentum across channels and geographies. Its comparable sales advanced 22%, reflecting the company’s deepening engagement with existing customers alongside its expanding footprint.
Surprisingly, the luxury clothing retailer’s gross profit margin expanded 360 basis points despite ongoing pressure from tariffs and the initial effects of the de minimis elimination. This reflects the company’s ability to control costs and operating leverage. The combination of higher sales and stronger margins translated into substantial bottom-line growth. Aritzia’s adjusted net income soared 184.6% year-over-year in the second quarter of the current fiscal year.
Notably, since fiscal 2020, the retailer has sustained double-digit revenue and earnings growth. To be precise, its top line has grown at a compound annual growth rate (CAGR) of 23% during that period. Moreover, its earnings grew at a 19% CAGR. These strong multiyear trends highlight the durability of its revenue and earnings, as well as management’s solid execution.
Thanks to its strong financial performance, Aritzia shares have surged more than 115% year-to-date, and the stock has compounded at 36.2% annually over the past three years, generating a total return of nearly 369%.
Aritzia has significant upside potential
Aritzia’s recent share price rally has lifted its valuation, yet the premium appears warranted given the company’s solid growth trajectory and expanding market presence. The brand continues to gain momentum as its compelling product offering and stepped-up marketing investments attract a larger and increasingly loyal client base.
Notably, the company’s sales channels, including retail and e-commerce, are performing well. Over the past year, Aritzia expanded its store footprint by roughly 25% across the U.S. and Canada, boosting its top-line growth.
Further, the company’s digital performance remains solid. Since fiscal 2020, e-commerce revenue has compounded at approximately 33% annually. Looking ahead, sustained marketing activity, broader brand awareness, and the rollout of an upgraded international online platform augur well for future growth. Further, the launch of the Aritzia shopping app adds another gateway for customers to engage with the brand, lowering friction and boosting conversion. Together, these initiatives are likely to deepen customer reach and enhance the scalability of the company’s digital ecosystem.
Margin pressures stemming from tariffs and the removal of the de minimis exemption represent a headwind. However, the company has taken steps to mitigate the impact. By relocating U.S. fulfillment to its Ohio distribution centre and expanding capacity, Aritzia has streamlined logistics. Further, a disciplined supply chain, reduced markdown activity, lower warehousing costs, and its broader smart-spending initiative will likely support margins.
With a growing U.S. boutique network, a high-performing digital channel, and a focus on operational efficiency, Aritzia is well placed to sustain strong growth. These growth catalysts strengthen the long-term investment case for Aritzia stock and provide a solid foundation for further upside.
