Lululemon Athletica Inc. (LULU): A Bull Case Theory

We came across a bullish thesis on Lululemon Athletica Inc., CompanyCharts’s Substack by Charts&Companies. In this article, we will summarize the bull’s thesis on LULU. lululemon athletica inc.'s share was trading at $225.56 as of June 23^rd. LULU’s trailing and forward P/E ratios were 15.34 and 15.17 respectively, according to Yahoo Finance.

Lululemon (LULU) presents a compelling investment opportunity, combining exceptional financial strength with consistent high growth and historically low valuation multiples. With $1.3 billion in cash and no interest-bearing debt, its balance sheet is pristine and fully capable of covering short-term liabilities.

Over the past 14 years, revenue, net income, and free cash flow have each compounded at an impressive 20% CAGR, a trend mirrored in EBIT and EBITA, while the current price-to-sales and free cash flow multiples are at decade lows. LULU’s PEG ratios, including a .76 based on net income and .67 on operating cash flow, imply undervaluation even under conservative growth expectations, making it attractive from a Lynchian GARP lens.

The company maintains strong margins—gross at 60%, operating at 23%, and net at 17%—with exceptional capital efficiency demonstrated by a 42% ROE and 24% ROA. Store count continues to grow 10–15% annually, underpinned by global expansion, with ample runway ahead compared to peers like The Gap. Despite some China sourcing exposure, LULU mitigates tariff risk through diversified supply chains in Vietnam and Taiwan. Management also returns capital to shareholders through buybacks, further enhancing per-share value.

At a current share price of $225 and a P/E of 15.21, the stock trades at a fair value even assuming growth decelerates to 10%. But if historical performance persists, the market may soon rerate the stock to multiples above 30. With strong fundamentals, no debt, consistent growth, and room for international and digital expansion, LULU stands out as a high-conviction long-term compounder.

Previously we covered a bullish thesis on Lululemon Athletica Inc. by FeedbackAlarmed5045 in May 2025, which highlighted the company’s brand strength, premium pricing, and strategic expansion. The company's stock price has depreciated by approximately 19% since our coverage. This is because the thesis hasn’t played out yet. Charts & Companies shares a similar view but emphasizes valuation and compounding financial metrics.

Lululemon Athletica Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 48 hedge fund portfolios held LULU at the end of the first quarter, which was 60 in the previous quarter. While we acknowledge the risk and potential of LULU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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