Lululemon Athletica Inc (LULU, Financial) has experienced a notable daily gain of 5.37%, with a substantial three-month gain of 23.53%, reflecting a robust performance in the market. With an Earnings Per Share (EPS) of 7.9, investors are keen to determine if the stock is fairly valued. This article delves into the valuation analysis of Lululemon Athletica, guiding readers through a detailed assessment of its financial health and market position.
Company Introduction
Lululemon Athletica Inc. stands as a premier designer, distributor, and marketer of athletic apparel and accessories for a diverse clientele. With a history dating back to 1998 and headquartered in Vancouver, Canada, Lululemon Athletica has expanded its reach to over 670 company-owned stores across 19 countries, alongside a strong e-commerce presence. The company's offerings include a range of products from yoga pants and running attire to fitness accessories like yoga mats. When juxtaposed with its current GF Value of $483.1, Lululemon Athletica's stock price of $489.64 suggests a close alignment with the estimated fair value, setting the stage for an in-depth valuation analysis.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. This value serves as a benchmark, suggesting the fair trading value of a stock. At a market cap of $62 billion, Lululemon Athletica's alignment with the GF Value indicates that it is fairly valued, implying that the long-term return of its stock could closely mirror the company's business growth rate.
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Financial Strength
Investing in companies with robust financial strength minimizes the risk of capital loss. The financial fortitude of Lululemon Athletica is evident through its cash-to-debt ratio of 0.93, surpassing 63.87% of its peers in the Retail - Cyclical industry. With a financial strength ranking of 7 out of 10 from GuruFocus, Lululemon Athletica showcases a fair financial position.
Profitability and Growth
Consistent profitability is a hallmark of a less risky investment, and Lululemon Athletica has maintained profitability for the past decade. With annual revenue of $8.80 billion and an impressive operating margin of 21.94%, the company outperforms 95.85% of its industry counterparts. This exceptional profitability is reflected in its perfect score of 10 out of 10.
Growth is a pivotal element in a company's valuation. Lululemon Athletica's 3-year average revenue growth rate surpasses 88.48% of the companies in its industry, and its EBITDA growth rate of 25.2% ranks higher than 76.07% of its competitors, indicating a strong trajectory for value creation.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) reveals the efficiency of a company in generating cash flow relative to its invested capital. Lululemon Athletica's ROIC of 31.35 significantly exceeds its WACC of 11, indicating robust value creation for shareholders.
Conclusion
In summary, Lululemon Athletica (LULU, Financial) is deemed fairly valued, with a solid financial foundation and exceptional profitability. The company's growth outshines a significant portion of its industry, pointing to a promising future. For a deeper dive into Lululemon Athletica's financials, one can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
