Aritzia (TSX:ATZ) Valuation Check After S&P/TSX Composite Entry and Rising Apparel Market Focus

Aritzia (TSX:ATZ) just joined the S&P/TSX Composite Index, and that index promotion is drawing fresh attention to a stock already riding shifting Canadian apparel trends and steady brand execution.

See our latest analysis for Aritzia.

The index inclusion has landed at a time when Aritzia already had the wind at its back, with an 18 percent 1 month share price return and a 1 year total shareholder return of roughly 126 percent, signalling building momentum rather than a one day pop.

If Aritzia’s run has you thinking about what else might be gaining traction, this could be a good moment to explore fast growing stocks with high insider ownership.

With Aritzia now in the benchmark spotlight and its shares sitting just above consensus targets despite strong fundamental growth, the real question is whether investors still have upside to capture or if the market has already priced in future gains.

Most Popular Narrative Narrative: 6.4% Overvalued

With Aritzia closing at CA$113.82 versus a narrative fair value of CA$107, the current share price is running slightly ahead of that roadmap.

Analysts are assuming Aritzia's revenue will grow by 13.8% annually over the next 3 years.

Analysts assume that profit margins will increase from 8.1% today to 12.5% in 3 years time.

Read the complete narrative.

Curious how a fashion retailer earns a valuation profile usually reserved for market darlings? The secret lies in aggressive revenue scaling and a sharp profitability reset. Want to see which earnings bridge and future multiple have to line up for this to work? The full narrative breaks down the exact steps.

Result: Fair Value of $107 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained success hinges on flawless U.S. expansion and resilient consumer demand, as weaker store performance or macro headwinds could quickly pressure margins and growth expectations.

Find out about the key risks to this Aritzia narrative.

Another View: Cash Flows Tell a Different Story

While the narrative framework suggests Aritzia is 6.4 percent overvalued at CA$113.82 versus fair value of CA$107, our DCF model points the other way and implies fair value closer to CA$132.35, or roughly 14 percent upside. Which lens should carry more weight in your process?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Aritzia for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 901 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Aritzia Narrative

If you would rather dig into the numbers yourself and challenge these assumptions, you can build a personalized narrative in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Aritzia.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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