Why Now Might Be the Best Time to Buy Lululemon Stock
Lululemon stock (NASDAQ:LULU) is now trading around $331, appears undervalued given its strong fundamentals, even if the stock tends to get knocked around during market storms. The company delivered solid Q1 2025 results, with revenue rising 7% to $2.37 billion and EPS climbing to $2.60, narrowly beating expectations. Yet the market focused on a softer-than-expected 1% gain in same-store sales and a lowered full-year outlook, driven in part by tariff pressures. The result? A knee-jerk 22% after-hours selloff that says more about short-term sentiment than long-term value.
Despite its high-performance profile, LULU trades like a value stock. Lululemon trades at roughly 18x on trailing earnings (slightly below the historical average) and 19x price-to-free cash flow – both below the S&P 500’s averages—yet this is a company that consistently outperforms on revenue, margins, and return on capital. Compared to arch rival Nike, Lululemon is cheaper across key profit metrics, with a lower P/E and a more attractive P/FCF. Investors are essentially buying Ferrari performance at Lexus pricing. And with a $32 billion market cap generating $1.6 billion in trailing free cash flow —a 5% cash flow yield, LULU looks more like a long-term wealth compounder than a volatile apparel name. For investors who seek lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
