Lululemon’s stock performance has been exceptional
Lululemon Athletica’s (LULU) better-than-expected results and the overall positive sentiment toward the athleisure market has driven the company’s stock price to new highs this year. Its stock has surged 118% in the last year, and the company is currently sitting close to an all-time high.
Most other sportswear stocks have also posted solid returns, though they lagged far behind LULU. Nike (NKE), Columbia Sportswear (COLM), and Skechers (SKX), for instance, have gained 39%, 65%, and 25%, respectively, over the last 12 months (as of May 25). Although Under Armour (UAA) has gained a modest 5% in the last 12 months, it has gained 43% year-to-date. The S&P 500 Apparel and Accessories has risen 35% over the past year, outperforming the S&P 500, which has risen 13.4%.
Lululemon’s soaring stock price has boosted its valuation. The company’s valuation has touched a historical high, and it is currently trading at a one-year forward PE ratio of 34x. Its three-year average PE ratio is 28x. LULU is also trading at a premium to peers Nike (28x), Columbia Sportswear (25x), and Skechers (13.7x).
However, it has a better near-term earnings potential than all three of them. Lululemon’s EPS are expected to rise 19% over the next year. In comparison, Nike’s EPS are projected to rise ~11%, while COLM’s and SKX’s are expected to rise 8% and 14%, respectively.
Investors seeking exposure to LULU could consider the First Trust Consumer Discretionary Alpha DEX ETF (FXD), which invests 1.8% of its portfolio in LULU. Continue to the next part of this series to learn about Wall Street’s views on the company.