Could Cash Machine Lululemon Athletica Stock Be Your Next Buy?

Lululemon Athletica (LULU) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With LULU

LULU stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.

The stock may not reflect it yet, but here is what’s going well for the company: Lululemon’s Q4 2025 guidance suggests strong holiday demand, with revenue at the high end of expectations. Robust international expansion, particularly China’s 46% surge in Q3 2025, drives performance despite U.S. sales headwinds. Management is addressing this with a 2026 product reset, aiming for 35% new styles and faster development cycles. A 24 million North American membership base and a recent $1 billion share repurchase program highlight underlying strength.

LULU Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 5.3%, but Lululemon Athletica stock does
• Strong Margin: Last 12 month operating margin of 22.0%
• Growth: Last 12 revenue growth of 8.8% – low growth, but this selection is all about high yield and margin
• Valuation: LULU stock currently trading at 62% below 2Y high, 15% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of LULU fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While LULU stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Lululemon slid nearly 93% in the Global Financial Crisis, a massive drop. The 2018 correction hit it for about 31%, and during the Covid pandemic, it fell close to 47%. The inflation shock knocked it down around 46%. Even with strong fundamentals, Lululemon hasn’t been immune to sharp pullbacks when market stress hits. Risk is real, even for well-regarded names. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read LULU Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell LULU Stock.

Stocks Like LULU

Not ready to act on LULU? Consider these alternatives:

1. Accenture (ACN)
2. Qualcomm (QCOM)
3. Paychex (PAYX)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

Navigate Market Cycles With Asset Allocation, Not Just Stocks

Stocks are just one piece of the puzzle. To navigate shifting economic environments, you need a strategy that protects wealth through intelligent diversification across asset classes.

Would a portfolio with 10% commodities, 10% gold, and 2% crypto protect you better if markets crash 20%? In today’s volatile landscape, diversifying beyond stocks is critical. We’ve crunched the numbers and found that multi-asset allocation is key. Our wealth management partner helps HNIs implement these strategies, using tools like the Trefis High Quality Portfolio to optimize the equity portion.