Lululemon Athletica's (LULU 0.80%) stock performance this year isn't a reflection of the company's story. The shares are heading for a double-digit loss. At the same time, revenue is climbing, and the maker of yoga-inspired clothing is on its way to meeting growth goals. In fact, it's even launched a second growth plan in a matter of just a few years.
So Lululemon has a solid earnings track record -- and success is far from over. That's why Lululemon is my top growth stock to buy in 2022.
A strong relationship with fans
Lululemon has increased annual revenue and net income over time. The company has built a strong relationship with its fans, who keep coming back for quality products that they've gotten to know and love.
LULU Net Income (Annual) data by YCharts
Lululemon said the recent Black Friday was its biggest day ever for revenue and traffic. But here's even better news: The apparel maker generally doesn't have to rely on markdowns to drive its sales gains. The company's brand strength means customers are ready to pay regular prices for Lululemon products.
And Lululemon managed to pick up 1.5 points of U.S. market share in the most recent quarter -- even as revenue of the adult active apparel industry slipped.
Lululemon puts a big focus on technology so that its products will stand out from those of rivals. For instance, it's designed the Strongfeel shoe to keep the foot stable during training. And it created this product specifically for women, rather than modeling it from a men's shoe.
To further attract and keep customers, Lululemon recently launched a new membership program. There are two tiers. The free level offers benefits like a chance to access product drops first and invitations to online events. The paid level -- at $39 a month -- offers members more than 10,000 training sessions, store discounts, and more.
Lululemon embarked on a plan to grow revenue back in 2019. It involved growing digital and men's line sales and international revenue. Today, the company is on track to meet the goals of this plan ahead of schedule.
A new growth plan
So Lululemon this year launched a new growth plan. This five-year plan aims to deliver $12.5 billion in annual revenue in 2026. That's double today's level. To do that, Lululemon once again plans to double its digital and men's line sales and quadruple international revenue.
To again meet goals in a short period of time, Lululemon will focus on product innovation, guest experience, and market expansion. These areas of strength helped the company rapidly grow in recent years -- even during difficult times, such as the early days of the pandemic and during today's context of rising inflation. That means there's reason to be confident Lululemon can once again meet its goals.
Now, let's take a look at valuation. The stock has declined 19% so far this year, for a performance similar to that of the S&P 500.
That's left Lululemon trading for 32 times forward earnings estimates. And that's down from more than 60 just a year ago. This looks cheap, considering Lululemon's earnings track record and most recent report. In the third quarter, the company increased total revenue, comparable sales, digital sales, and gross profit in the double digits.
All of this means now looks like a great time to get in on this top growth stock -- and benefit as the next chapters of its growth story unfold.
