About a year ago, Lululemon Athletica's (LULU -0.98%) management team, led by CEO Calvin McDonald, released a new and improved financial outlook, called the "Power of Three x2" strategy. This built upon goals outlined three years prior. Lululemon had achieved its previous goals ahead of schedule, so the upgraded financial targets were necessary. 

This top apparel stock is firing on all cylinders right now, based on its latest earnings figures. And because of this strong momentum, Lululemon just might reach its "Power of Three x2" goal ahead of the fiscal 2026 deadline. Does this mean it's time to buy the stock? Let's take a closer look. 

No signs of slowing down 

During its fiscal 2022 (ended Jan. 29), Lululemon registered revenue of $8.1 billion, up 30% year over year. And for the current fiscal year, the business expects sales to rise 15%. If this estimate pans out, then it would mean that over the previous five years Lululemon would have increased revenue at a compound annual growth rate (CAGR) of greater than 23%. In the original "Power of Three" plan from 2019, the leadership team said they would like to see annual sales gains in the "low teens" over the next five years.

Clearly, Lululemon has been significantly exceeding those early expectations by roughly 10% per year. Under-promising and over-delivering can be a wonderful attribute for investors. It can result in lowered expectations, which simply raises the chances that the company can produce results that wow to the upside. Lululemon shares are up a whopping 290% over the past five years, indicative of this type of behavior. 

This gives me confidence that the company can exceed the new "Power of Three x2" outlook, which includes a revenue target of $12.5 billion by fiscal 2026. Last April when this plan was announced, Lululemon's management projected sales to double between fiscal 2021 and fiscal 2026, which is a 15% annualized growth rate.

But in the just-ended fiscal year, the company's revenue increased 30%, as I noted earlier. This means sales will need to increase at a CAGR of 11.5% over the next four fiscal years -- a low bar indeed, especially for a company growing as fast as Lululemon. 

The business is on its way to exceeding management's forecast, which could be possible with strong international expansion. In fiscal 2022, just 30% of Lululemon's overall revenue was derived outside of the U.S. Nike, on the other hand, generated 60% of its total sales outside North America in its latest fiscal quarter. 

One specific country is poised to be a big growth engine in the years ahead. "Our new store openings in 2023 will include 30 to 35 stores in our international markets, with the majority of these planned for China," CFO Meghan Frank said on the Q4 2022 earnings call. Lululemon has almost 100 stores in mainland China right now (out of 655 total). 

The men's category is also a huge focus, which has grown faster than the women's segment over the last three years. In 2024, Lululemon plans to launch its footwear line for men. What's more, the digital channel, which already accounts for 52% of company-wide sales in the most recent fiscal quarter, should drive further gains for Lululemon. 

The valuation isn't cheap 

Lululemon's operations were virtually unfazed over the past three years. A global health crisis, supply chain bottlenecks, soaring inflation, and the possibility of a recession haven't done much to impact the company. And even today, Lululemon continues performing extremely well. 

So it shouldn't be a surprise that the stock isn't exactly cheap right now. At a current price-to-earnings ratio of 55, Lululemon's fantastic fundamental attributes and long-term optimism might already be priced into the stock. But if investors believe that the business can once again exceed the expectations management has laid out, shares could head much higher a few years from now.