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Aritzia Inc. Subordinate Voting Shares (ATZ $74.04)
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Groupe Dynamite Inc. Subordinate voting shares (GRGD $30.49)
Q: What do you think of women's clothing maker Groupe Dynamite (GRGD)? The sales and profit growth looks pretty good. Stock isn't cheap, though, at about 25 times earnings. I figure you prefer Aritzia, but would GRGD be a decent addition to a small cap portfolio?
5i Research Answer:
GRGD has some growth drivers with its integrated e-commerce functionalities and a strong presence across the US and Canada. It has an active share repurchase program, and the CEO owns about 87% of the shares. Growth is expected to be decent in the coming years, in the low double-digit range, and analyst estimates have been trending higher. Its margins have been expanding and it generates strong free cash flow. It trades at an OK multiple of 18X forward earnings, cheaper than ATZ, but ATZ is also expected to grow at a faster pace. We like it as a complementary name to ATZ, with upside potential if it continues to expand its margins and innovate its stores and service offerings.