Over the past five years, Lululemon (LULU -0.79%) shares have produced a superb return of 440%, crushing the broader market's performance by a huge margin. The popular athleisure brand has found remarkable success by first selling high-quality, premium-priced products for women, but it is now a top clothing option for men as well. Plus, the business is starting to push more into international markets for growth. 

Is now the time for investors to add Lululemon stock, which is down 15% in 2022, to their portfolios? Let's take a closer look. 

Lululemon is an outstanding business 

Unsurprisingly, Lululemon often gets overshadowed by the juggernaut in the sports apparel industry, Nike. Nike generated trailing 12-month revenue of $47.1 billion, compared to just $7.1 billion for Lululemon, so it's not a shocker that the former's market cap of $145 billion is far greater than the latter's $42 billion. What's more, Nike has a much longer operating history, having been around for almost six decades. 

Nonetheless, I think there are three key attributes investors should pay attention to that make Lululemon a wonderful business. First, the Canada-headquartered company possesses a strong, and growing, consumer brand. As I alluded to earlier, the business went from focusing solely on serving women to now offering quality menswear, too. Lululemon can be viewed as a high-end brand, and its gross margin of 56.5% in the fiscal 2022 second quarter proves this. Customers are willing to pay up for the company's pants, shorts, jackets, and hoodies. 

And according to Piper Sandler's Taking Stock With Teens Fall 2022 survey, Lululemon was the second most popular clothing brand among the valuable Gen Z demographic. This is a fruitful place for the brand to be, as younger consumers can build an affinity for Lululemon and become lifelong customers. 

Additionally, Lululemon has tremendous growth potential. From fiscal 2016 through fiscal 2021, revenue and net income soared 167% and 245%, respectively, so it's no wonder the stock skyrocketed as well.

But the growth isn't finished yet. Looking ahead, Lululemon still has lots of untapped opportunities to increase its top line. By 2026, management expects annual revenue to hit $12.5 billion (compared to $6.3 billion in fiscal 2021). Doubling men's and digital sales, and quadrupling international revenue, will help to achieve this goal.  

In the most recent quarter, Lululemon generated 83% of its overall revenue in North America, meaning that overseas markets, particularly China, are a big opportunity to drive higher sales over time. 

Lastly, while Lululemon has obviously been a great growth stock to own, the business is also incredibly profitable. The company's operating margin, at 21.5% in the latest quarter, exemplifies this. And this means lots of free cash flow that could be returned to shareholders. In fiscal 2014, Lululemon started repurchasing its stock, resulting in a reduced outstanding share count. 

Astute investors shouldn't let Lululemon stock's weak 2022 performance distract them from just how superb a business this really is. 

Are shares overvalued? 

Finding great companies to look at is only part of the challenge for investors. The other issue is making sure the valuation is right before deciding to buy. As of this writing, Lululemon's stock trades for a price-to-earnings (P/E) ratio of 39, which at first glance looks on the expensive side of things. However, it is cheaper than the trailing five-year and 10-year P/E averages for the company. 

Nonetheless, this multiple is still more expensive than the P/E of 26 that rival Nike's stock sells for. Compared to Nike, though, Lululemon has much better growth prospects and improved profitability (as measured by margins). It might be a smart decision for investors to add a small allocation to Lululemon right now.