We think as a simple rule of thumb investors should look at the growth in inventory level relative to sales growth. For example, if sales growth was 10%, investors should see a similar growth of 10% inventory. On the other hand, if sales growth was 10%, but inventory grew at a more significant pace such as 30%, then it could indicate a risk for overstocking, which may result in inventory write-off or selling at a discount, as a result, impairing the brand value. For ATZ, we think the worst is already behind the company, ATZ seems to be resuming its growth trajectory from here. If ATZ could manage to grow 15% as management indicates, we think the stock could see a multiple re-rate from here, and we would be comfortable owning it for the long term.
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