Rapid growth is usually associated with booming software and internet companies. So you may be surprised to know that the stock I'm discussing today is Lululemon Athletica (LULU -0.75%). The "athleisure" trailblazer has seen its market capitalization soar nearly seven-fold over the past five years with revenue and net income registering similar gains. 

That kind of expansion is atypical of an apparel business, but Lululemon keeps climbing to new heights. The company recently reported blowout second-quarter financial results, causing the stock price to pop more than 10% immediately after the release. 

Yet, even at today's levels, a $1,000 investment in the stock could be a fruitful endeavor for investors.  Let's see why that may be the case.

Two smiling people sitting on sidewalk wearing athletic apparel.

Image source: Getty Images.

What makes this company so great? 

First and foremost, Lululemon's success can be attributed to its strong brand. Because the company doesn't rely much on third-party retailers like Dick's Sporting Goods or Foot Locker to move merchandise, products avoid being marked down and stay at full price. This distribution strategy is in stark contrast to bigger rivals Nike and Adidas.

And Lululemon produces a higher gross margin -- 58.1% in the most recent quarter vs. Nike's 45.8%. Again, credit goes to the company's vertically integrated value chain, which allows Lululemon to build deeper connections with its customers. In fact, direct-to-consumer (or e-commerce) sales accounted for 41.2% of overall sales in the latest quarter. Utilizing a community-based marketing strategy, Lululemon has created brand awareness and guest loyalty literally from the ground up. 

The company is expanding further. Expect its men's segment to drive meaningful growth in the years ahead. Leadership also expects international markets -- where 35 to 40 new stores will be opened this fiscal year -- to one day equal its North American sales. 

Additionally, Lululemon's at-home fitness product, Mirror, operates in a burgeoning industry that should support expansion efforts over time. "We're also excited about how Mirror can be the vehicle through which we offer long-term benefits to our guests, such as membership programs and special experiences," CEO Calvin McDonald said on a recent earnings call. The possibilities abound.

Upgraded guidance showcases optimism 

Management thrilled investors when it raised its third-quarter and full-year guidance. Lululemon now expects to generate about $1.4 billion in revenue for the third quarter (up 27% year-over-year) and about $6.2 billion for the full fiscal 2021 (up 42%). Diluted earnings per share, estimated to come in at roughly $1.31 for Q3 and $7.21 for the full year, also got a boost. What's even more remarkable is that Lululemon is on pace to reach its 2023 revenue target, which it set in 2018, two years ahead of schedule. 

Like every other retailer today, however, Lululemon is facing supply-chain issues heading into the crucial holiday shopping season. But its high gross margin affords the business the ability to invest in extra freight capabilities. "We are monitoring this closely and leaning into the agility of our supply chain, the strength of our planning and allocations team, and the powerful partnerships with our vendors to help mitigate the risks where we can," said McDonald recently, seeking to alleviate investor concerns. 

Lululemon's inventory has risen at an annual rate of 26% over the past two years, slightly ahead of the growth rate management expects for sales through the third quarter. This should ease some of the near-term uncertainty a bit. Nonetheless, the situation is something to pay close attention to in the next couple of quarters. 

All told, Lululemon has had another spectacular period and is well on its way to hitting a $100 billion market cap in the next few years. Putting $1,000 in the stock today I believe will prove to be a smart decision.