As the macroeconomic uncertainties and the possibility of a recession continue to hurt investorsâ sentiments in 2023, many TSX growth stocks have witnessed massive value erosion. Although itâs 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, Iâll 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 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 companyâs profitability. For example, Aritziaâs 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
Itâs 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 companyâs 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, Aritziaâs 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, Aritziaâs management remains focused on investing in business scalability to prepare âfor the next phase of expected growth.â 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 itâs 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.
The post Down Over 50%, 1 TSX Growth Stock to Buy Hand Over Fist appeared first on The Motley Fool Canada.
Before you consider Aritzia, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023… and Aritzia wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks
* Returns as of 10/10/23
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
- Is Aritzia Stock Worth a Buy in October?
- 3 Growth Stocks I’d Snap Up With $3,000
- Where Will Aritzia Stock Be in 5 Years?
- 3 Stock Bargains Hiding in Plain Sight
- Adjusting Your Portfolio for the New Normal Higher Interest Rates in Canada