LULULEMON ATHLETICA INC (NASDAQ:LULU) – A Strong Candidate for GARP Investors

LULULEMON ATHLETICA INC (NASDAQ:LULU) stands out as a compelling pick for investors seeking long-term growth at a reasonable price. The company meets key criteria from Peter Lynch’s investment strategy, balancing strong growth with sound financial health and reasonable valuation.

Why LULU Fits the GARP Approach

• Earnings Growth: LULU has delivered an impressive 5-year average EPS growth of 24.4%, well above the 15% minimum threshold in Lynch’s strategy. This indicates sustained profitability.
• Reasonable Valuation: The stock’s PEG ratio (0.90) is below 1, suggesting it is reasonably priced relative to its growth.
• Strong Profitability: With a 41.97% Return on Equity (ROE), LULU outperforms most peers in the textiles and apparel industry.
• Healthy Balance Sheet: The company carries no debt, a rare strength that enhances financial stability. Its current ratio of 2.16 also reflects ample liquidity.

Fundamental Highlights

LULU earns a solid 7/10 in our fundamental analysis, excelling in profitability and financial health. Key strengths include:

• High Margins: Operating margin (23.7%) and profit margin (17.1%) rank among the industry’s best.
• Efficient Capital Use: ROIC of 30.8% shows effective reinvestment of capital.
• Growth Consistency: Revenue has grown at a 21.6% annualized rate over the past five years.

While the stock trades at a premium (P/E of 21.97), its growth trajectory and financial discipline justify the valuation for long-term investors.

For more details, review the full fundamental analysis of LULU.

Our Peter Lynch Strategy screener lists more stocks matching these criteria and is updated regularly.

Disclaimer

This is not investment advice. The observations here are based on current data, but investors should conduct their own research before making decisions.