Let me start by saying that I absolutely hate trends. I would rather wear the ugliest clothing and have the most outdated technology if it meant sticking it to society.
That said, I adore my Canada Goose (TSX:GOOS) jacket. After several years of gawking at strangers and admiring their $1000 parkas, I finally bought a Canada Goose winter jacket with the upmost skepticism.
After wearing it for an hour in the brutal Canadian winter I fell in love. Imagine being hugged by a big friendly bear and encapsulating yourself in a layer of soft fur and warmth. That’s pretty much what wearing a Canada Goose jacket feels like.
Parkas aside, Canada Goose is also the ultimate get-rich stock for growth investors. Before I proceed, I want to make it very clear that this article is intended for people with a high risk tolerance.
If you’re a more passive investor, feel free to check out my other articles, but Canada Goose is not for you.
Growth potential in Asia Canada Goose opened its first store in China in December 2018. China is one of the largest luxury markets in the world, and the fact that people lined up for the grand opening is a sign of good things to come.
The Chinese spend almost USD$73 billion on luxury goods per year. Brands such as Gucci, Hermes and Louis Vuitton have enjoyed success in China for many years.
Canada Goose’s competitive advantage is that it doesn’t sell wallets or hand bags. Its market is purely in outerwear.
This means that the company is not in direct competition with the likes of Gucci and Louis Vuitton as a purse will not provide the same utility as a winter jacket.
If Canada Goose is able to capture a mere 10% of the luxury goods market it could mean a CAD$9.7 billion market cap which loosely translates to a share price of $88.71 – a gain of 53%.
Increasing net income Canada Goose’s net income has increased by 10 times since FY 2014. As of FYE 2018, the company’s net income is $143 million which is up from $14 million in FY 2014.
With a net income margin of 17.3%, Canada Goose does a good job of increasing its bottom line through products that have a high margin.
This is important for investors as a high income margin means that a greater percentage of revenue becomes net income which drives share prices.
Bottom line If you’re a growth investor with a high tolerance for risk, then Canada Goose is the stock for you. I phrase it this way as a recession will obliterate the share price as luxury goods are the first to take a hit when the economy is not doing well.
For those of you willing to take the risk, Canada Goose has two things going for it at the moment. First, it has barely scratched the surface of the Asian luxury goods market which could lead to significant business growth for the company.
Second, the company’s net income has increase 10 times since FY 2014 with indication that it will increase more. Thus, the share price is likely to increase.
Ultimately, the decision is yours, but Canada Goose is a win in my books.
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Fool contributor Chen Liu has no position in any of the stocks mentioned.
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