Lululemon Athletica (LULU) continues to defy gravity as it now has its eyes on $100 a share.
One-Year Chart
LULU has now doubled from the $45 or so it was a year ago. Although the stock seems ligh, the stock growth was fueled primarily from profit growth. My 2010 Q1 chart shows the $41 stock with a P/E of 37 (which I thought was high then).
With Estimates showing profit growth of 41% and 30% the next two quarters, LULU isn’t overpriced with its 44 P/E. LULU has a history of beating the street and there’s no sign yet that will stop.
Earnings Table
LULU’s been growing profits big time. On average the company has put up 118% profit growth the last four quarters. Earnings have doubled and the stock has doubled.
Management also does a great job of beating the street. Over the last six-months the company has even gained steam in this department, beating estimates by more than a dime each time.
The biggest reason this stock is on fire is Annual Profit Estimates are surging. Just this quarter 2011 estimates jumped from $1.76 to $2.03 — surprising because after earnings were announced company management said it was having trouble supplying enough clothes to meet demand. Analysts took estimates up, not down.
What I really like about this earnings table is estimates for the next four quarters are solid and these numbers have been increasing. Notice quarterly estimates during some of the prior quarters got reduced (in red), that’s a thing of the past — business is better.
Fair Value
Unfortunately, this stock is always fully valued. LULU rises when Annual Earnings Estimates increase. Right now I have the stock slightly overvalued. I really don’t like that LULU is not an investor favorite and gets lots of time on CNBC. I like my stocks below the radar.
Bottom Line
The bottom line is this is one serious investment. If there was one stock I wish I had its this one. You can’t knock LULU, the numbers are superior. But I still have trouble paying 44 times earnings for a clothing company when clothing stocks go through boom-and-bust periods. I’ll keep watching Lululemon and hope it falls enough for me to get in. That’s unlikely in this bull market.
