Lululemon Athletica (LULU) Trading At The Best Valuation in Seven Years
June 13, 2024 (Investorideas.com Newswire) The iconic athletic apparel brand has seen its stock decline 40% since the late 2023 all-time high. That is presenting an opportunity. Its Price/Earnings (P/E) is the lowest it has been in seven years
Trading.biz analyst Cory Mitchell commented "LULU recently hit its lowest P/E in the last seven years at 23.7. After a slight bounce in the stock, the P/E is currently 24.9. The last time investors could buy LULU near a 25 P/E was mid-2017. The company is still steadily growing revenues and analysts are forecasting increasing earnings over the next several years. LULU likely won't be able to grow at the same pace it has in the past, but the sharp stock price selloff presents an opportunity to pick up a high-quality stock at a fair to very good valuation."
Despite the recent stock sell-off, LULU is still a quality company. Here are some key metrics to consider.
- Analysts forecast that earnings will increase at a rate of 11.7% per year over the next five years. The median EPS growth expectation for S&P 500 stocks is 9.4%, for comparison.
- LULU has a strong history of bolstering earnings. Over the last five years, EPS has increased an average of 26.8% per year. Future growth is expected to be lower, so that is a concern, but that is why this stock should be purchased at lower P/E values now as opposed to high ones.
- The current P/E of 24.9 is near the lowest P/E the stock has seen in the last seven years. 23.7, recorded in May, was the lowest reading going back to June 2017.
- The company is financially health with an "A" financial health rating from Morningstar.
- LULU is buying back shares. This can help bolster shareholder value especially if the shares are purchased when the stock price is relatively low. The buyback yield is 2%.
- Sales are increasing along with earnings. This is the ideal scenario. When only one is going up it could mean there are some issues. Analysts are forecasting 11% sales growth this year and 9.7% the following year, to accompany the increasing earnings. Sales have increased an average of 23.5% per year over the last five years.
Lululemon is a quality stock trading at its best valuation in about seven years. There are risks though. The selloff may continue or earnings may slow more in the future than expected. The P/E may continue to drop (or even rise if earnings fall) without the share price rising.
Technically the stock has been in a big range for the last few years. $300 to $250 is the lower end of the range, with $475 to $500 being the upper end of the range. Buying near the low end of the range is technically appealing.
Source Trading.biz
More Info:
Disclaimer/Disclosure: Investorideas.com is a digital publisher of third party sourced news, articles and equity research as well as creates original content, including video, interviews and articles. Original content created by investorideas is protected by copyright laws other than syndication rights. Our site does not make recommendations for purchases or sale of stocks, services or products. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. All investing involves risk and possible losses. This site is currently compensated for news publication and distribution, social media and marketing, content creation and more. Disclosure is posted for each compensated news release, content published /created if required but otherwise the news was not compensated for and was published for the sole interest of our readers and followers. Contact management and IR of each company directly regarding specific questions.
More disclaimer info: https://www.investorideas.com/About/Disclaimer.asp Learn more about publishing your news release and our other news services on the Investorideas.com newswire https://www.investorideas.com/News-Upload/
Global investors must adhere to regulations of each country. Please read Investorideas.com privacy policy: https://www.investorideas.com/About/Private_Policy.asp
