It's been a great afternoon session for Lululemon Athletica investors, who saw their shares rise 3.0% to a price of $286.58 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
a Very Low P/E Ratio but Trading Above Its Fair Price:
Lululemon Athletica Inc., together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.6 and an average price to book (P/B) ratio of 3.19. In contrast, Lululemon Athletica has a trailing 12 month P/E ratio of 22.1 and a P/B ratio of 8.79.
Lululemon Athletica's PEG ratio is 2.26, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Strong Revenue Growth but Similar Gross Margins to the Industry Average of 52.52%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,288 | $3,979 | $4,402 | $6,257 | $8,111 | $9,619 |
| Gross Margins | 55% | 56% | 56% | 57% | 55% | 57% |
| Net Margins | 15% | 16% | 13% | 16% | 11% | 16% |
| Net Income (M) | $484 | $646 | $589 | $975 | $855 | $1,550 |
| Net Interest Expense (M) | $9 | $8 | -$1 | $1 | $4 | $43 |
| Depreciation & Amort. (M) | $122 | $162 | $185 | $224 | $292 | $379 |
| Diluted Shares (M) | 131 | 131 | 130 | 128 | 127 | 125 |
| Earnings Per Share | $3.7 | $4.93 | $4.52 | $7.63 | $6.74 | $12.42 |
| EPS Growth | n/a | 33.24% | -8.32% | 68.81% | -11.66% | 84.27% |
| Avg. Price | $114.7 | $180.36 | $290.77 | $372.05 | $321.38 | $286.57 |
| P/E Ratio | 29.26 | 34.68 | 61.73 | 46.8 | 45.91 | 22.35 |
| Free Cash Flow (M) | $517 | $386 | $574 | $995 | $328 | $1,644 |
| CAPEX (M) | $226 | $283 | $229 | $395 | $639 | $652 |
| Current Ratio | 2.53 | 2.19 | 2.07 | 1.99 | 2.32 | 2.43 |
Lululemon Athletica has rapidly growing revenues and increasing reinvestment in the business and exceptional EPS growth. Additionally, the company's financial statements display generally positive cash flows and an excellent current ratio of 2.43. Furthermore, Lululemon Athletica has similar gross margins to its peers.
