Is LULU a Lemon?

With shares of Lululemon Athletics (NASDAQ:LULU) trading at around $74.37, is LULU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Not many stocks are as fiercely debated at Lululemon. Some people feel that this company is nothing more than a trend that will eventually fade. The mistake these people are often making is that they’re associating Lululemon with yoga-wear only. The company originated in Canada, but did it stay in Canada? The point here is that Lululemon is growing from just yoga-wear to active-wear, and even everyday-wear. Therefore, the question isn’t whether or not Lululemon can survive by only selling yoga-wear, but if it can make a successful transition into other areas.

At the present time, Luluemon has a loyal following, which will likely lead to increased consumer purchases in other areas as the company expands. This expansion won’t be a timid one. Lululemon is aiming big in Europe and Asia. Other positives include growing margins and an expected growth rate of 29.71 percent over the next five years.

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So far, everything looks dandy. However, there are a few negatives. One, the Trailing P/E is 45.87 and the Forward P/E is 32.74. Two, there has been consistent insider selling over the past six months. Three, bigger players like Under Armour (NYSE:UA) and/or Nike Inc. (NYSE:NKE) might enter any arena in which Lululemon operates.

Let’s take a look at some important numbers so we can get a better idea of the Lululemon story.