Lululemon stock analysis. LULU stock.
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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
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NewsTranscript
00:00 Lululemon has provided great returns for shareholders since its IPO back in 2007.
00:06 Its share price is up more than 2500% and the stock jumped 20% last month after reporting
00:12 another strong earnings report. That takes the company up to a valuation of $48 billion.
00:17 With $1.2 billion of cash and little debt, the enterprise value is $47 billion.
00:23 Revenue over the last 12 months is $8.1 billion, with $855 million of net income
00:29 and $328 million of free cash flow. So the business is valued at almost 6 times revenue
00:35 and 57 times earnings. That's expensive but Lululemon has grown its top line revenue every
00:41 year in the last decade and it's maintained strong gross margins of around 55% with net
00:47 income margins around 11%. It's also useful to see how the company has grown its retail footprint.
00:54 Over the last fiscal year, the company has opened another 81 stores, with the majority
01:00 across the US and China. And it's had to close only 6 stores which statistically isn't bad.
01:05 In fact, revenue increased by almost 30% in the last year, from $6.3 billion to $8.1 billion,
01:12 which is even higher than the increase in stores. The company also compares favourably against its
01:17 peers. It's operating margin at 16.4% is more than Adidas which plunged to 3% last year and Nike
01:26 which sits at 14.3%. This shows the brand strength of the company. At the investor day,
01:32 management said it wanted to double revenue in 5 years time and quadruple international growth.
01:37 Despite all these positives, the price of Lululemon's stock does provide some risk to
01:42 investors. The company's e-commerce segment benefited greatly from the pandemic and it
01:47 wouldn't be a surprise to see some slowdown in top line revenue. If you assume Lululemon can
01:52 compound revenue at 15% for the next 10 years, then operate with a 12% net margin, earnings would
01:58 be roughly $4.6 billion in 10 years time. A 25 times multiple on that figure gets us to an
02:04 enterprise value of $115 billion, so that works out to an investment return of around 9.4% a year.
02:12 Overall, retail is a fickle industry and a 57 times earnings multiple
02:17 leaves very little margin of safety which is why I'm going to give the stock a neutral rating,
02:22 but these are my personal opinions, not financial advice and I hold no position in this stock.
02:27 For more detailed investing ideas, make sure to visit our website overlookedalpha.com