What Does Lululemon Athletica Inc.'s (NASDAQ:LULU) Share Price Indicate?

Today we're going to take a look at the well-established Lululemon Athletica Inc. (NASDAQ:LULU). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$386 and falling to the lows of US$299. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Lululemon Athletica's current trading price of US$308 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lululemon Athletica’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Lululemon Athletica

Is Lululemon Athletica Still Cheap?

According to my valuation model, the stock is currently overvalued by about 20%, trading at US$308 compared to my intrinsic value of $256.46. This means that the opportunity to buy Lululemon Athletica at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Lululemon Athletica’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Lululemon Athletica look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 54% over the next couple of years, the future seems bright for Lululemon Athletica. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in LULU’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe LULU should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on LULU for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for LULU, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Lululemon Athletica as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Lululemon Athletica and we think they deserve your attention.

If you are no longer interested in Lululemon Athletica, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.