Financial markets can greatly fluctuate from day to day or month to month. But the share prices of world-class businesses only go in one direction over a long-enough period: up.

The apparel retailer Lululemon Athletica (LULU 0.32%) fits the bill as a top-notch business. A $10,000 investment in the stock made 10 years ago would now be valued at just over $50,000, compared to the $30,000 that $10,000 in an S&P 500 index would now be worth with dividends reinvested.

Lululemon has been an excellent stock for investors seeking tremendous capital appreciation. But is the stock still a buy for growth investors after this significant investment outperformance?

Brand power is driving outsize growth

Since its founding in 1998 and its first official store opening in 2000, Lululemon has blossomed into a formidable athletic apparel retailer. The Canadian business has over 600 stores and 29,000 employees in 18 countries. The company's $46 billion market capitalization makes it the largest athletic apparel retailer on the planet aside from Nike's (NYSE: NKE) $190 billion market cap.

Lululemon recorded $2.8 billion in revenue in its fiscal fourth quarter ended Jan. 29, which was a blistering 30.2% jump over the year-ago period. How did the large-cap company deliver such astounding top-line growth during the quarter? Lululemon has built a reputation for high-quality products to exercise in and wear for leisure. Along with its image of promoting health and wellness, this explains why the company has a high customer loyalty rate of 89%.

Lululemon's recent launch of its free-to-join membership program, called Lululemon Essential, could further boost that loyalty. The program offers member-only perks, such as faster returns, free studio classes, and receipt-free returns. It has attracted more than 9 million members in the first five months of the program.

CEO Calvin McDonald said that the early results show the membership program has increased customer engagement. That helps explain how the company logged total comparable-store sales growth of 27% for its fiscal fourth quarter.

Lululemon's adjusted diluted earnings per share (EPS) grew 30.6% year over year to $4.40 in the fiscal fourth quarter. Since the company's cost of goods sold and its selling, general, and administrative expenses collectively increased at a faster rate than revenue, net margin slightly contracted to 20.3% during the quarter. Coupled with a marginal reduction in the company's share count due to its buyback program, this is how adjusted diluted EPS growth outpaced revenue growth for the quarter.

Lululemon should steadily open more stores and grow its membership program. This is why analysts believe that adjusted diluted EPS will grow at 19% annually over the next five years. That's almost twice the 11.2% projection for the apparel retail industry.

A person wearing athleisure workout attire.

Image source: Getty Images.

A fortress-like balance sheet

Lululemon should have the capital to fund its growth ambitions because the company is expected to have a net cash position of $1.4 billion during this fiscal year (fiscal year 2024). Stacked against the $2.4 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) that analysts are forecasting for the fiscal year, this is a ratio of net debt to EBITDA of negative 0.6. Putting this into perspective, Nike's net debt to EBITDA is negative 0.3 for its current fiscal year.

The valuation is a bargain

Following the announcement of its fiscal-year earnings, shares have ripped higher: The stock has gained 15% over the last week alone. Yet, Lululemon still looks to be a convincing buy for growth investors.

The stock's forward price-to-earnings (P/E) ratio of 31.8 is well above the apparel retail industry average of 18.6. But considering the company's promising prospects, this premium valuation is arguably justified.