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Lululemon Athletica Inc (NASDAQ:LULU): Poised For Long Term Success?

Victor Youngblood

Looking at Lululemon Athletica Inc’s (NASDAQ:LULU) earnings update in January 2018, it seems that analyst forecasts are substantially optimistic, with earnings expected to grow by a high double-digit of 62.06% in the upcoming year, compared with the historical 5-year average growth rate of 6.49%. With net income at current levels of US$258.66M, we should see this rise to US$419.19M in 2019. Below is a brief commentary on the longer term outlook the market has for Lululemon Athletica. Investors wanting to learn more about other aspects of the company should research its fundamentals here. View our latest analysis for Lululemon Athletica

Can we expect Lululemon Athletica to keep growing?

Longer term expectations from the 28 analysts covering LULU’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for LULU, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NasdaqGS:LULU Future Profit Apr 19th 18

This results in an annual growth rate of 14.99% based on the most recent earnings level of US$258.66M to the final forecast of US$489.70M by 2021. This leads to an EPS of $3.75 in the final year of projections relative to the current EPS of $1.9. The bottom-line growth seems to be caused by cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, LULU’s profit margin will have expanded from 9.76% to 13.61%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Lululemon Athletica, I’ve compiled three important aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Lululemon Athletica worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Lululemon Athletica is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lululemon Athletica? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.