Investing in the stock market isn't for the faint of heart: Unrealized capital gains can quickly turn into unrealized capital losses, and vice versa. Investors must keep this fact in mind if they want to maximize their chances of success.

The other important step to achieve strong results as an investor is to buy shares in great businesses. One such example is Lululemon Athletica (LULU 2.98%). Up 18% in the past year, shares of the apparel giant have significantly outperformed the 10% gains of the Nasdaq Composite during that time.

This raises the question: Does Lululemon stock remain a buy for growth investors? Let's find out.

Lululemon has the "it factor"

Combining quality products with an incredible understanding of the psychology of your customers is an almost surefire way to success as a business. Investors can look to Lululemon to support this theory.

The company's approach of selling top-notch athletic apparel and building a loyal customer base through helping its customers physically, mentally, and socially has certainly paid off. Lululemon's net revenue soared 206% from fiscal 2017 to 2022, reaching $8.1 billion. The company's non-GAAP (adjusted) diluted earnings per share (EPS) also nearly quadrupled during that time to $10.07 in 2022. 

Lululemon showed no signs of slowing down in the first quarter of its fiscal year 2023, either. The retailer's net revenue surged 24% higher year over year to $2 billion in the first quarter. Women's and men's category revenue grew at 22% and 17%, respectively, during the quarter.

But the biggest growth catalyst of all for the top line was its smallest merchandise category of accessories, which was up 67% over the year-ago period. This was due to high demand for Lululemon's backpacks, hats, and tote bags. Just as encouraging, CEO Calvin McDonald noted that the company's free-to-join membership program known as Lululemon Essential continued to grow rapidly in the quarter.

Lululemon's diluted EPS soared 54.1% year over year to $2.28 for the fiscal first quarter. Slower growth in the company's expenses than net revenue fueled net margin expansion of 270 basis points to 14.5% in the quarter. Along with a lower diluted average share count, this is how Lululemon's diluted EPS growth outpaced net revenue growth during the quarter. 

Analysts anticipate that Lululemon will deliver 16.8% annual earnings growth through the next five years. Putting this into context, that is much more than the apparel retail industry's average growth forecast of 12.8%. 

A person wearing athleisure workout attire.

Image source: Getty Images.

Robust financial health

Lululemon appears to have the financial ability to open more stores and pursue future avenues of growth. Analysts believe that the company's net cash position will be $1.5 billion for the fiscal year ending in January 2024 -- almost as big as Nike's $1.6 billion net cash position. That puts Lululemon in a strong financial position. Analysts expect the company to achieve $2.5 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) for the current fiscal year. 

An attractive valuation

Even with the run-up in Lululemon's stock over the past year, it arguably remains a good deal. Lululemon's forward price-to-earnings (P/E) ratio of 26.8 is much greater than the apparel retail industry average of 17.8. But given the company's popularity and vastly superior growth potential, this valuation is buyable for growth investors.