2-Star Stocks Poised to Plunge: lululemon athletica?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, yoga gear retailer lululemon athletica (NAS: LULU) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Lululemon's business and see what CAPS investors are saying about the stock right now.
|Headquarters (Founded)||Vancouver, Canada (1998)|
|Market Cap||$9.3 billion|
|Trailing-12-Month Revenue||$874.7 million|
|Management||CEO Christine Day (since 2008)|
CFO John Currie (since 2007)
|Return on Equity (Average, Past 3 Years)||33.4%|
|Cash/Debt||$277.0 million / $0|
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 26% of the 1,224 members who have rated Lululemon believe the stock will underperform the S&P 500 going forward.
They have certainly grown their potential, but it would be a little dubious to say that a maker of athletic wear who really has no other competitive moat besides the fact that people know their name, and that they are obviously the largest fitness apparel company focusing on the yoga/pilates/etc. trend, is worth this much. ...
Those who are going to buy from lululemon most likely already have, and could certainly stay loyal, but realistically how much room is there for customer growth? This is not a company who is worth almost 60 times earnings. It may still be worth higher than a mature company, given that it still might have a little growing to do, but even a 20 times earnings multiple puts this company at closer to $20-$25. And who knows if that is even worth it if other companies come in and steal market share.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of lululemon athletic and Under Armour. Motley Fool newsletter services have recommended buying shares of lululemon athletica, Nike, and Under Armour. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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