Should you buy Lululemon stock? May 2023
- 6 months ago
Lululemon stock analysis. LULU stock.
Visit our website for more: https://www.overlookedalpha.com
Lululemon has provided great returns for shareholders since its IPO back in 2007. Its share price is up more than 2,500%. And the stock jumped 20% last month after reporting another strong earnings report.
That takes the company up to a valuation of 48 billion dollars. With 1.2 billion of cash and little debt the enterprise value is 47 billion.
Revenue over the last 12 months is 8.1 billion, with 855 million of net income and 328 million of free cash flow.
So the business is valued at almost six times revenue and 57 times earnings.
That’s expensive but Lululemon has grown its top line revenue every year in the last decade and its maintained strong gross margins of 55% with net income margins around 11%.
It’s also useful to see how the company has grown its retail footprint. Over the last fiscal year, the company has opened another 81 stores, with the majority in the US and China. And it’s had to close only 6 stores which, statistically, isn’t bad.
In fact, revenue increased by almost 30% in the last year (from $6.3b to $8.1b), which is even higher than the increase in stores.
The company also compares favorably against its peers. Its operating margin at 16.4%, is more than adidas (which plunged to 3% last year) and Nike which sits at 14.3%.
• Adidas 3.0% (down from 9.3% in 2021)
• Nike 14.3% (down from 15.6% in 2021)
This shows the brand strength of the business and at the company investor day, management said it wanted to double revenue in 5 years time and quadruple international growth.
Despite all these positives, the price of Lululemon stock does provide some risk to investors.
The company’s ecommerce segment benefited greatly from the pandemic and it wouldn’t be a surprise to see some slowdown in top line revenue.
#stocks #stockstowatch #investing #lululemonstock
Visit our website for more: https://www.overlookedalpha.com
Lululemon has provided great returns for shareholders since its IPO back in 2007. Its share price is up more than 2,500%. And the stock jumped 20% last month after reporting another strong earnings report.
That takes the company up to a valuation of 48 billion dollars. With 1.2 billion of cash and little debt the enterprise value is 47 billion.
Revenue over the last 12 months is 8.1 billion, with 855 million of net income and 328 million of free cash flow.
So the business is valued at almost six times revenue and 57 times earnings.
That’s expensive but Lululemon has grown its top line revenue every year in the last decade and its maintained strong gross margins of 55% with net income margins around 11%.
It’s also useful to see how the company has grown its retail footprint. Over the last fiscal year, the company has opened another 81 stores, with the majority in the US and China. And it’s had to close only 6 stores which, statistically, isn’t bad.
In fact, revenue increased by almost 30% in the last year (from $6.3b to $8.1b), which is even higher than the increase in stores.
The company also compares favorably against its peers. Its operating margin at 16.4%, is more than adidas (which plunged to 3% last year) and Nike which sits at 14.3%.
• Adidas 3.0% (down from 9.3% in 2021)
• Nike 14.3% (down from 15.6% in 2021)
This shows the brand strength of the business and at the company investor day, management said it wanted to double revenue in 5 years time and quadruple international growth.
Despite all these positives, the price of Lululemon stock does provide some risk to investors.
The company’s ecommerce segment benefited greatly from the pandemic and it wouldn’t be a surprise to see some slowdown in top line revenue.
#stocks #stockstowatch #investing #lululemonstock