Helped by its high-priced premium apparel products, Lululemon Athletica (LULU 1.70%) has found tremendous financial success. Both revenue and net income have consistently soared at double-digit rates, pushing its shares up 215% over the past five years, a gain that easily beats that of the Nasdaq Composite.

This year has been rewarding, too, with the shares up 18% so far in 2023. Yet, they are still about 21% below their all-time high reached in November 2021. Let's take a closer look at this popular apparel business.-- and why this is still a top growth stock to consider buying right now.

Incredible growth 

Lululemon's growth has been nothing less than outstanding. In the three-year period through January 2023, sales increased at a compound annual rate of 26.5%. And it's all the more impressive considering that this stretch included the coronavirus pandemic, supply chain bottlenecks, high inflation, rising interest rates, and ongoing economic uncertainty.

The apparel maker registered only one year-over-year quarterly revenue decline. Unsurprisingly, this was during the fiscal 2020 first quarter. It's been nothing but positive gains since then. 

This momentum has continued into this fiscal year. In the 2023 first quarter (ended April 30), Lululemon generated revenue of $2 billion, up 24% from the year-ago period. Diluted earnings per share totaled $2.28, good for a monster gain of 54%. "We delivered top- and bottom-line results that exceeded our guidance," CEO Calvin McDonald said on the Q1 2023 earnings call. These numbers also beat Wall Street expectations. 

Not only does the business continue to prove its resilience, particularly at a time when the average consumer might be struggling to find extra discretionary income, but it's also showing that achieving growth is not a problem at all. In fact, management thinks Lululemon has a long expansionary runway ahead. 

They believe that by fiscal 2026, annual company revenue will reach $12.5 billion. That would translate to double the sales produced in fiscal 2021. But based on Lululemon's latest growth trends, the company is well on its way to exceeding this target. 

Boosting the international business will be key to this plan. In the most recent fiscal quarter, the U.S. accounted for 65% of overall revenue, a much higher proportion than an industry heavyweight like Nike. It's encouraging that Lululemon's sales in China soared 80% in the latest period. Over time, investors should expect overseas markets to continue to be a major growth engine.

Strong brand recognition 

Lululemon's success is largely a result of its strong brand, which is the company's competitive advantage. Consumers in the market for apparel or footwear obviously care about form and function when making purchasing decisions. However, they also appear to focus on brand image, something Lululemon has done a fantastic job at developing. 

The company's quarterly gross margin averaged 55.9% over the past five years, a clear indication of consumers' willingness to pay a premium price for Lululemon's products. This profitability is bolstered by Lululemon's distribution strategy. It avoids having to rely on third-party wholesale accounts to help push merchandise, instead depending on its network of 662 company-owned stores. 

Moreover, Lululemon has a notable digital presence. Online sales represented 42% of total revenue in the latest quarter. Because sales from this channel usually generate higher margins, it can be a long-term boon for Lululemon's profitability.

Looking at the valuation

Investors would probably agree that Lululemon is a great business from a purely qualitative perspective. Its growth and profitability are outstanding. And the brand has shown to be in huge demand by consumers all over the world. But what about the last piece of the investing puzzle, the valuation? 

As of this writing, the stock trades at a forward price-to-earnings (P/E) ratio of 31.7. At first glance, that appears to be on the expensive side. But when you consider the forward P/E multiple for the entire Nasdaq-100 index of 29.2, Lululemon's valuation looks a lot more attractive. 

This is a booming business whose earnings are likely to be much higher five years from now. And that makes the stock worthy of a closer look today.