Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, yoga gear retailer lululemon athletica (Nasdaq: LULU ) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Lululemon's business and see what CAPS investors are saying about the stock right now.
Lululemon facts
| Headquarters (Founded) |
Vancouver, Canada (1998) |
| Market Cap |
$7.9 billion |
| Industry |
Apparel |
| Trailing-12-Month Revenue |
$820.3 million |
| Management |
CEO Christine Day (since 2008)
CFO John Currie (since 2007)
|
| Return on Equity (Average, Past 3 Years) |
32.3% |
| Cash/Debt |
$264.7 million / $0 |
| Competitors |
Gap (NYSE: GPS )
Nike (NYSE: NKE )
Under Armour (NYSE: UA )
|
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 26% of the 1,145 members who have rated Lululemon believe the stock will underperform the S&P 500 going forward. These bears include All-Star kurtdabear, who is ranked in the top 15% of our community, and Jeffrey2012.
Earlier this summer, kurtdabear touched on Lululemon's seemingly unsustainable stock price: "This little rocket stock looks like it's perilously close to maximum altitude. While I generally don't bet against debt-free companies, LULU has a price like a high-tech phenomenon and will probably have difficulty growing going forward in an atmosphere of consumer retrenchment."
In fact, lululemon currently sports a lofty forward P/E of 40.5. That represents a clear premium to competitors like Gap (9.4), Nike (14.7), and Under Armour (29.9).
CAPS member Jeffrey2012 elaborates on the bear case:
This is actually a really good business since they have managed to sell out their products at [full price] without markdowns. Very few retailers can actually do that.
That said, way too many investors have been eyeing any ounce of growth and thus pounced on LULU. While it is quite possible they may very well continue to outperform in terms of their business, the stock has run way too far ahead of fundamentals. Not only that, but there is no doubt they will continue to face selling pressure going forward because fund managers who needed to sell their winners will definitely be looking at LULU.
What do you think about Lululemon, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
Interested in another easy way to track Lululemon? Add it to your watchlist.
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