LULU Stock Study (10-16-25)

Posted by Mark on December 13, 2024 at 07:03 | Last modified: October 16, 2025 10:38

I recently did a stock study on Lululemon Athletica Inc. (LULU, $167.10). Previous studies are here, here, and here.

M* writes:

     > Lululemon Athletica Inc. designs, distributes, and markets
     > athletic apparel, footwear, and accessories for women, men,
     > and girls. Lululemon offers pants, shorts, tops, and jackets
     > for both leisure and athletic activities such as yoga and
     > running. The company also sells fitness accessories, such
     > as bags, yoga mats, and equipment.

Over the past decade, this large-size company has grown sales and EPS at annualized rates of 21.6% and 26.5%, respectively [FY ends 1/31; reference to year at BI website and Value Line (VL) incremented to match]. Lines are mostly up, straight, and parallel except for EPS dips in ’18, ’21, and ’23. VL gives an Earnings Predictability rating of 90.

Over the past decade, PTPM leads peer and industry averages while ranging from 16.4% in ’23 to 24.3% in ’25 with a last-5-year mean of 20.6%. ROE is roughly equal to industry averages while trailing peers, increasing from 24.5% in ’16 to 44.7% in ’25 with a last-5-year mean of 35.9%. Debt-to-Capital is zero through 2019 and remains lower than peer and industry averages as the company maintains no long-term debt. The last-5-year mean is 25.0% (leases).

Current (Quick) Ratio is 2.27 (1.04) per M* who assigns a “Narrow” Economic Moat, gives an “Exemplary” rating for Capital Allocation, and offers a C grade for Financial Health [seems puzzling]. VL rates the company B++ for Financial Strength.

With regard to sales growth:

• YF projects YOY 3.6% and 4.6% for ’26 and ’27, respectively (based on 30 analysts).
• Zacks projects YOY 3.7% and 5.1% per year for ’26 and ’27, respectively (12 analysts).
• VL projects 4.7% annualized growth from ’25-’30.
• CFRA projects 3.9% YOY and 3.7% per year for ’26 and ’25-’27, respectively.
• M* gives a 2-year ACE of 3.5% annualized growth and projects long-term growth of 7.0% per year in analyst note.

My 3.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects annualized growth of 7.1% and 7.2% for ’25-’27 and ’25-’28 (based on 34 analysts).
• Nasdaq.com gives ACE of 1.2% YOY and 1.7% per year for ’27 and ’26-’28 (13 / 13 / 3 analysts for ’26 / ’27 / ’28).
• Seeking Alpha projects 4-year annualized growth of 8.3%.
• Finviz gives 5-year ACE of 3.1% contraction per year (4).
• Argus projects 5-year annualized growth of 19.0%.
• YF projects YOY 11.2% contraction and 1.1% growth for ’26 and ’27 (25).
• Zacks projects YOY 11.9% contraction and 1.2% growth for ’26 and ’27 (13) along with 5-year growth of 1.2%/year.
• VL projects 1.8% annualized growth from ’25-’30.
• CFRA projects 11.2% YOY contraction and 1.2% growth per year for ’26 and ’25-’27 along with a 3-year CAGR of +6.0%.
• M* projects long-term annualized growth of 14.6%.

My 1.0% per year forecast is near bottom of the range (mean of six: 7.0%). My initial value will be ’25 EPS of $14.64/share rather than 2026 Q2 $14.71 (annualized).

My Forecast High P/E is 24.0. Over the past 10 years, high P/E ranges from 32.9 in ’25 to 64.9 in ’22 (’21 upside outlier of 88.9 excluded) for a last 5-year mean of 50.4 and last 5-year-mean average P/E of 39.3. I am well below the range.

My Forecast Low P/E is 9.0. Over the past 10 years, low P/E ranges from 15.4 in ’25 to 37.7 in ’23 with a last-5-year mean of 28.2. I am forecasting below the range and current P/E (11.5).

My Low Stock Price Forecast (LSPF) of $131.80 is default based on initial value given above. This is 21.1% (17.3%) less than the previous close (52-week low).

These inputs land LULU in the BUY zone with a U/D ratio of 5.4. Total Annualized Return (TAR) is 16.9%.

PAR (using Forecast Average—not High—P/E) is less than I seek for a large-size company at 8.5%. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 136 studies done in the past 90 days (31 outliers and my study excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 6.0%, 7.3%, 24.4, and 12.0. I am lower across the board. VL projects a future average annual P/E of 15.0, which is lower than MS (18.2) and lower than mine (16.5).

MS high / low EPS are $20.83 / $14.10 versus my $15.39 / $14.64 (per share). My high EPS is lower due to a lower growth rate. Value Line’s high EPS is in the middle at $16.00/share.

MS LSPF of $147.30 implies a Forecast Low P/E of 10.4: less than the above-stated 12.0. MS LSPF is 12.9% less than the default $14.10/share * 12.0 = $169.20 resulting in more conservative zoning. MS LSPF is still 11.8% greater than mine.

I believe MOS is robust in this study because my inputs are near or below respective analyst/historical ranges and MS averages. MS TAR of 22.5% is 5.6% per year greater than mine.

Anecdotally speaking, valuation metrics are about as dichotomous as any stock I have ever studied. PEG is 10.6 and 11.4 per Zacks and my projected P/E, respectively: beyond significantly overvalued. VL agrees: “hold off… until tangible signs of a turnaround emerge. While some view the recent pullback as a buying opportunity, we see elevated downside risk amid deteriorating sentiment, increased competition, and a premium category still struggling to regain traction.” On the other hand, Relative Value [(current P/E) / 5-year-mean average P/E] is dirt cheap at 0.29, Kim Butcher’s “quick and dirty DCF” calculates fair value 154% greater than the previous close, and CFRA has fair value 104% greater. CNN Business finds 34 analysts with 12-month stock forecasts ranging between 40% below to 81% above the previous close.

Despite a robust MOS, because of the tremendous uncertainty expressed here I would discount the following target prices an additional amount (e.g. 10%).

Per U/D, LULU is a BUY under $191/share. BI TAR criterion is met ~ $184 given a forecast high price ~$369 (no dividend).

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