Canada goose is now too cheap to ignore

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Canada Goose Holdings Inc. (NYSE: GOOS) was once one of the hottest growth stocks on the market. After its debut in 2017, stocks quickly rose from $ 17 to $ 36.

At the end of 2018, they were over $ 70. This year sales grew 51%, which is really impressive for a luxury retailer with a relatively limited range of products. Even more impressive is that the diluted earnings per share rose from 11 cents in 2015 to 67 cents in 2018.

Diluted earnings were 96 cents per share by 2019, but the share price weakened.

After years of rapid growth, the market had priced in ridiculous growth rates. In 2019, management revised its long-term growth guidelines for sales to "over 20%" and for earnings per share to "over 25%". That's still a healthy growth rate, but compared to expectations that have prevailed, the stock has had quite a success.

For example, Bank of America (NYSE: BAC) downgraded its stocks to neutral and wrote in a note: "We believe the prospect of a slowdown in GOOS direct-to-consumer channels justifies lower P / E multiples . "

The shares have lost around 50% of their value since November 2018. While resetting expectations required a revaluation of the stock, it seems that the valuation has swung too far in the other direction. No math expert is required to realize that this stock is too cheap to ignore.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Watch what grows"data-reactid =" 22 ">Watch what grows

Canada Goose has already done what few retailers have ever achieved: creating a world-famous brand.

In 1957, Sam Tick founded Metro Sportswear, which specialized in wool vests, raincoats and snowmobiles. The company was later renamed Canada Goose, which adorned its new expedition parka, which was developed for scientists at Antartica's McMurdo Station. A few years later, Laurie Skreslet was the first Canadian to climb Mt. Everest. He was wearing a Canada Goose parka.

This brand heritage was instrumental in creating one of the most popular and trusted brands in Canadian history. Management estimates that more than 5% of all Canadians own one of their jackets, the vast majority of which are planning to buy another Canada Goose jacket. You simply cannot achieve this level of brand loyalty overnight.

Canada Goose has used its domestic success to grow rapidly over the years. Around 35% of the company's sales still come from Canada and another 30% from the US market. This is intrinsically fascinating when you consider that the United States has almost ten times as many inhabitants.

Only a third of the company's turnover comes from abroad. This is the number to watch out for. While the company still has a lucrative runway in the U.S., it is international growth that will determine its long-term history. However, for some reason, international opportunities have not been priced into the stock.

Total sales increased 27.7% in the last quarter. However, if you didn't break this growth down geographically, you'd miss the whole story. In the United States, sales increased 38.5%. But it was Asia that had really impressive numbers: sales doubled from $ 26.6 million to $ 48.9 million.

Sales in Asia still make up a small part of sales, so it's no wonder that few people pay attention to them. Even after doubling the size, sales from Asia only increased from 11.6% of sales to 16.6%.

But not only Asian sales are growing rapidly. Worldwide sales, which make up 35% of sales, grow by more than 50% per year. This segment continues to represent a minority of total sales. It is therefore not yet the main story, but will be the main driving force for the company in the coming years.

<p class = "Canvas-Atom-Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "With rapid international growth it is not difficult to agree Earnings per share of over $ 2.66 ($ 2.05) are expected in 2022 minimum Expectancy. "data-reactid =" 31 "> Given the rapid international growth, it is not difficult to agree with management's updated forecasts, with earnings per share of over $ 2.66 ($ 2.05) expected by 2022 minimum Expectancy.

If the company had $ 2.05 earnings per share in 2022, it would only make 17.5 times the earnings in 2022. It's just too cheap for a company that still has a decade of double-digit profit growth.

After a sharp decline in valuation, the shares are now trading with a 28.4-fold decrease in the forward profit. Even if no multiple improvement is assumed, the stock would be worth $ 58.22 in 2021. That is 63% more than the current retail price.

With a lasting competitive advantage from its globally recognized brand, Canada Goose seems to be an incredible bet for the new decade.

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