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 growth at a reasonable price (GARP). The company meets key criteria from Peter Lynch’s investment strategy, balancing strong earnings growth, profitability, and financial health with an attractive 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 reflects sustained profitability and operational strength.
• Reasonable Valuation: With a PEG ratio (5-year) of 0.64, the stock is priced attractively relative to its growth. A PEG below 1 suggests the market may be undervaluing its future earnings potential.
• Strong Profitability: The company’s return on equity (ROE) of 42.1% highlights efficient use of shareholder capital, far exceeding Lynch’s 15% benchmark.
• Financial Health: LULU has no debt (Debt/Equity of 0) and a current ratio of 2.28, indicating ample liquidity to meet short-term obligations.

Fundamental Strengths

LULU’s fundamentals are robust, earning a rating of 7 out of 10 in our analysis. Key highlights include:

• Profitability: High margins, with a 16.8% net profit margin and 23.4% operating margin, place it ahead of most industry peers.
• Growth Stability: Revenue has grown at a 21.6% 5-year CAGR, though forward estimates suggest a moderation to ~8% annually.
• Valuation: Trading at a P/E of 15.6, LULU is priced below the industry average (35.6) and the S&P 500 (27.5).

For a deeper dive, review the full fundamental analysis of LULU.

Our Peter Lynch Strategy screener lists more stocks that align with this strategy and is updated daily.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own research before making investment decisions.