Stock Analysis

The 3.6% return this week takes Aritzia's (TSE:ATZ) shareholders five-year gains to 239%

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When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. One great example is Aritzia Inc. (TSE:ATZ) which saw its share price drive 239% higher over five years. On top of that, the share price is up 32% in about a quarter.

Since it's been a strong week for Aritzia shareholders, let's have a look at trend of the longer term fundamentals.

However if you'd rather see where the opportunities and risks are within ATZ's industry, you can check out our analysis on the CA Specialty Retail industry.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years of share price growth, Aritzia moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Aritzia share price has gained 183% in three years. During the same period, EPS grew by 29% each year. Notably, the EPS growth has been slower than the annualised share price gain of 41% over three years. So one can reasonably conclude the market is more enthusiastic about the stock than it was three years ago.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

TSX:ATZ Earnings Per Share Growth October 3rd 2022

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

It's good to see that Aritzia has rewarded shareholders with a total shareholder return of 11% in the last twelve months. However, that falls short of the 28% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Aritzia by clicking this link.

Aritzia is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

Valuation is complex, but we're helping make it simple.

Find out whether Aritzia is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Aritzia Inc., together with its subsidiaries, designs and sells apparels and accessories for women in North America.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth4
Past Performance5
Financial Health6

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet with solid track record.