Investing in the stock market has been nothing short of a roller-coaster ride over the past 11 months. Investors have navigated their way through a historic 34% downturn in the S&P 500 in about a one-month time span and have reveled in the subsequent 10-month bounce-back rally.

But with the S&P 500 as pricey as it's been in nearly two decades, investors might be leery of putting their money to work. The thing is, growth and value can always be found in the market -- you just have to be willing to do a little digging.

I consider Northern Star Acquisition Corp. (NYSE:STIC) to be my single best investment idea for February. 

A stopwatch that reads, Time to buy.

Image source: Getty Images.

There's always a chance this dog could bite

Northern Star Acquisition is a special purpose acquisition company, or SPAC. This means it's a blank check company looking to make acquisitions in order to grow and create value. In mid-December, it announced that it would be merging with dog-focused product and services company BarkBox in a deal that values the company at an enterprise value of $1.6 billion. The transaction is expected to close in the second quarter of 2021, upon which it will take on the BarkBox name and ticker (BARK). 

While I'm incredibly bullish about this deal, and even took the initiative to add Northern Star Acquisition to my portfolio last week, there are risks investors need to understand before taking the plunge.

Let's start with the basics: closing the deal. Though it's incredibly rare that a SPAC fails to gain approval to close an acquisition, it's always a possibility. Both Northern Star's and BarkBox's stockholders need to OK the proposed merger, and other standard customary closing conditions need to be met. There'd be little purpose in owning Northern Star if this deal weren't completed.

Secondly, direct-to-consumer pet supplies is a highly competitive space. The giant here is Chewy, which thrives on the monthly subscription model. There are a number of other up-and-comers, including Freshpet, which provides premium-quality foods and treats for dogs and cats at over 22,000 retail doors.

A third reason skeptics might raise an eyebrow or two is the company's bottom line. In an effort to secure market share, the BarkBox management team is constantly looking to innovate and expand into new channels. Doing so isn't cheap, so the company will likely continue to lose money. Current estimates cited in the BarkBox S-1 call for full-year net losses ranging from $21 million to as high as $41 million between fiscal 2020 and fiscal 2023. 

A happy dog on a couch, surrounded by its human family.

Image source: Getty Images.

Here's why Northern Star Acquisition is the stock you'll want to buy in February

Now that we've gone over some of the bigger risks of buying into Northern Star Acquisition, let's take a look at the laundry list of reasons BarkBox is a company you'll want in your portfolio.

First of all, companion pet spending in this country is enormous. According to data from the American Pet Products Association (APPA), an estimated $99 billion was spent on companion animals in the U.S. last year. That includes over $38 billion in food and treats, which is what BarkBox specializes in. At no point over the past quarter of a century have we seen a year-over-year decline in U.S. pet expenditures.

Pet ownership continues to climb, with our four-legged friends almost universally treated as members of the family. In 1988, an APPA survey found that 56% of households owned a pet. That figure has jumped 11 percentage points to 67%, as of a 2019-2020 National Pet Owners Survey. Nearly 85 million households now own a pet, 63.4 million of which have at least one dog. 

Aside from these growing spending statistics on companion animals, one of the most attractive aspects of the BarkBox operating model is that it's subscription-based. Subscriptions provide transparent, predictable, and high-margin revenue for the company. They also improve customer retention. In the most recent quarter (ended Sept. 30), BarkBox registered its highest monthly product retention (94.4%) since inception. It also has 1.05 million active subscriptions at the moment, which is up significantly from the 663,000 it had at the end of fiscal 2020. 

Additionally, since BarkBox is a digitally native platform, it has lower overhead costs than many other pet-based operators. With no unwanted product sitting on brick-and-mortar shelves, and the company's data-driven business model suggesting new products to existing customers, the company was able to deliver a robust gross margin of 61.2% through the first six months of fiscal 2021. According to the company's S-1, gross profit per subscription through the first eight months of fiscal 2021 is up 52% from fiscal 2018, with customer acquisition costs falling 11% over the same time frame. 

A dog holding a metal food bowl in its mouth.

Image source: Getty Images.

Innovation is also going to be key to BarkBox's long-term success. So far, the business has primarily benefited from sending themed toys and treats to dog owners each month, but expanding into new revenue channels will be the company's key growth driver in the years to come. This includes the introduction of Bark Home, which covers essential accessories like dog beds and collars, Bark Bright, which provides dental solutions for canines, and Bark Eats. Bark Eats is actually the most exciting of all these new ventures, as it creates a personalized, high-quality dry food diet for dogs, including portioning and delivery.

The company's ever-expanding retail channels go hand-in-hand with innovation. More than 23,000 retail outlets already carry BarkBox products, including Costco and Target. The introduction of new products can help boost distribution to these major retail hubs. But it's the company's accelerating growth on Amazon that should turn heads. More than $4 billion is spent annually on dogs in Amazon's marketplace, and BarkBox's Amazon-based revenue grew by 150% year-over-year, according to its S-1. 

To end this long list of reasons why Northern Star Acquisition (soon to be BarkBox) is a buy, just take a closer look at the company's fundamental comparisons to its peers. Full-year sales are expected to grow from $224 million in fiscal 2020 to an estimated $706 million by fiscal 2023. BarkBox is valued at roughly 2.5 times its 2022 full-year sales (the mean for other pet companies is closer to 8 times sales in 2022). It's also considerably cheaper based on its multiple to gross profit. 

There's arguably not a more attractive pet-focused growth stock to buy right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.