Amidst a daily loss of 6.98% and a three-month decline of 34.18%, Lululemon Athletica Inc (LULU, Financial) presents a compelling case for valuation analysis with an Earnings Per Share (EPS) of 12.2. This article explores whether Lululemon Athletica is significantly undervalued, urging investors to delve deeper into the financial nuances that might hint at a lucrative investment opportunity.
Company Overview
Lululemon Athletica Inc designs, distributes, and markets athletic apparel and accessories, catering to a wide range of leisure and athletic activities such as yoga and running. With over 700 stores across roughly 20 countries, and a robust online presence, the company has carved a niche in the athletic apparel industry since its inception in 1998. With a market cap of $37.90 billion and sales amounting to $9.60 billion, the comparison of its stock price to the GF Value suggests a significant undervaluation, providing a fertile ground for a detailed financial assessment.
Understanding GF Value
The GF Value is a proprietary measure reflecting the true value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Lululemon Athletica (LULU, Financial), the GF Value is set at $499.48, suggesting that the current price of $300.43 significantly undervalues the company. This discrepancy indicates potential for higher future returns, making it an attractive prospect for value investors.
Financial Strength and Stability
Investing in a company with solid financial strength diminishes risks of capital loss. Lululemon Athletica boasts a cash-to-debt ratio of 1.6, ranking better than 72.93% of its peers in the Retail - Cyclical industry. This financial stability, coupled with a GuruFocus financial strength rating of 7 out of 10, underpins its resilience in challenging economic climates.
Profitability and Growth Metrics
Lululemon Athletica has not only been profitable over the past decade but has also demonstrated superior growth and profitability metrics compared to industry standards. With an operating margin of 22.95%, it surpasses 96.22% of its industry peers. Additionally, its impressive three-year average revenue growth rate further solidifies its market position, indicating robust business dynamics and potential for sustained growth.
Evaluating ROIC and WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is crucial for assessing value creation. Lululemon Athletica's ROIC of 38.21 significantly exceeds its WACC of 10.7, highlighting efficient capital utilization that is likely to generate value for shareholders.
Conclusion
Lululemon Athletica (LULU, Financial) appears significantly undervalued based on GuruFocus's comprehensive analysis, combining financial strength, profitability, and growth prospects. For those interested in exploring further, detailed financials over the past 30 years can be accessed 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.
