What Is Lululemon Athletica Inc’s (NASDAQ:LULU) Share Price Doing?
Today we’re going to take a look at the well-established Lululemon Athletica Inc (NASDAQ:LULU). The company’s stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of $76.67 to $83.69. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lululemon Athletica’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Lululemon Athletica
Is Lululemon Athletica still cheap?
Lululemon Athletica appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Lululemon Athletica’s ratio of 39.43x is above its peer average of 23.79x, which suggests the stock is overvalued compared to the Luxury industry. In addition to this, it seems like Lululemon Athletica’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Lululemon Athletica?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Lululemon Athletica’s earnings over the next few years are expected to increase by 63.77%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in LULU’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe LULU should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on LULU for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for LULU, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Lululemon Athletica. You can find everything you need to know about Lululemon Athletica in the latest infographic research report. If you are no longer interested in Lululemon Athletica, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
