Fast Retailing’s global sales push is keeping investors confident that shares of the Uniqlo owner can extend double-digit gains that have already driven valuations above those of its global peers.

Asia’s biggest apparel maker has surged 48% over the past 12 months to become one of the top performers among 10 other clothing companies worldwide that have a market value of more than $10 billion. Fast Retailing’s price-to-earnings ratio is about 38, exceeding levels for Lululemon Athletica in the United States and Moncler in Italy.

"Even if the short-term valuation is high, considering its long-term growth potential, the investment is attractive,” Masakazu Takeda, a portfolio manager at Sparx Asia Investment Advisors who runs the Hennessy Japan Fund in Hong Kong, wrote in a note. "There is still room for growth, and I would like to expect an expansion of market capitalization.”

Fast Retailing’s share price of about ¥40,000 ($268) makes it one of the most expensive stocks on the 225-issue Nikkei Stock Average. With the stock’s weight on the benchmark at around 10%, the blue-chip gauge’s ability to reach an all-time high may partly depend on the company’s progress toward achieving its goal to triple current sales to ¥10 trillion and shift focus to overseas markets.

Chief Executive Officer Tadashi Yanai’s strategy is starting to bear fruit. Operating profit for the first fiscal quarter topped analysts’ average projections on robust sales in North America and Europe. In contrast, disappointing results at Hennes & Mauritz and Adidas have driven their shares lower this year.

Part of the key to Fast Retailing’s success is that its core mission is to produce clothing with mass appeal, according to Michael Causton, an analyst at JapanConsuming who publishes on Smartkarma, a network connecting investors, insight providers and corporates.

"I liken Uniqlo to be like the Toyota of clothing in offering well-priced, reliable-quality, solidly designed merchandise backed up by investment in workable tech in the form of fabric innovations with real-world application,” he said. "This also means it works in almost every country because most people want to buy basic apparel of some kind, even if they also buy Gucci.”

Fast Retailing announced last year that it expected to open 80 stores in China and roughly 60 new stores each year in Southeast Asia, India and the Australian region. About 56% of its revenue came from overseas in its 2023 fiscal year.

Still, the stock may face headwinds should gains push it further above the Nikkei 225’s weight limit for its constituents, according to Brian Freitas of Periscope Analytics. "Barring a sharp drop in the stock from now to end-July, there will be selling in Fast Retailing at the September rebalance as index weights will be capped at 10%,” he wrote in a note on Smartkarma.

In the longer term, expanding revenue and profit in overseas markets for the Uniqlo chain may be key growth drivers for the fiscal year ending August 2026, according to Bloomberg Intelligence analysts Catherine Lim and Trini Tan. Overseas earnings might lead to a 44% jump in operating profit by 2026 compared with 2023, they wrote, citing the Bloomberg Interactive Calculator.

"While within Japan we cannot expect much growth, the opportunity is Europe, the U.S., but especially SE (Southeast) Asia and South Asia,” JapanConsuming’s Causton said. "Uniqlo still has low market share overseas, outside China, and so we are bullish on that.”