It’s hard to name another up-and-coming Canadian growth sensation that’s been as impressive as Aritzia (TSX: ATZ). Of course, there are plenty of high-flyers within the AI scene that have been even hotter. But as the AI trade exhausts itself and continues its rather painful correction, I’d much rather be in a low-tech grower, especially given the magnitude of volatility that’s surrounded much of tech. In any case, Aritzia’s glorious ascent has paved the way for shares to more than triple to a 247% gain in the past two years.
Despite the magnitude of the hot run, the company is still quite small, with a market cap just below the $18 billion mark. In other words, there’s still plenty of room to run, especially as brand affinity outside of the Canadian market continues to grow. As early success from the U.S. expansion gives lift, the firm may just be able to put a heavier foot on the growth gas pedal.
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Aritzia’s firing on all cylinders
With the company recently shining a brighter light on its longer-term growth ambitions, as the firm looks to double revenue in the next five years, I’d much rather be a buyer than a seller of the shares, down close to 10% and looking to retest all-time highs. Though time will tell if the breakout moment will come for shares of ATZ before the year comes to a close, I must say that the long-term fundamentals are seriously impressive.
Going into year’s end, I expect Aritzia could continue humming along as it looks to thrive in an apparel market that’s actually quite challenging amid consumer-facing pressures. In my view, Aritzia’s growth story is one that a tough industry climate or economic environment might not be able to stop in its tracks.
So, can the firm really double its net revenue in the next five years?
Not only do I think it’s possible. I think it’s a realistic bar to pole-vault over, especially as the company continues hitting home runs south of the border.
Of course, the U.S. expansion is going to play a pivotal role as the Vancouver-based women’s clothing retailer looks to keep its impressive growth profile intact. Of course, there are great risks that come with investing in a fashionable apparel play. But, in my view, Aritzia is still in the early innings of a growth story that could see it continue to rise up the ranks of the Canadian stock market.
You’ve got to pay up for generational growth
While some sell-side analysts might be a bit put off by the premium valuation (Jefferies thinks the multiple has priced in a lot already), I’m inclined to view the high-growth apparel firm as more than worth the 31.7 times trailing price-to-earnings (P/E) multiple. At the end of the day, we’re talking about a firm with grand ambitions to double net sales in five years.
With a strong track record and top-notch management, I’d not be afraid to build a position now and on any dips moving forward. It’s hard to find a durable low-tech growth play that’s fairly valued, as I believe Aritzia is, while it’s still down 10% from its all-time highs. If Aritzia can make good on its growth in the U.S., my guess is that a richer multiple may be warranted.
