Lululemon Athletica inc. (LULU): Billionaire Stephen Mandel Was Buying

Peers for Lululemon Athletica inc. (NASDAQ:LULU) include NIKE, Inc. (NYSE:NKE), Under Armour Inc (NYSE:UA), Gildan Activewear Inc (USA) (NYSE:GIL), and Columbia Sportswear Company (NASDAQ:COLM). Most of these comparable companies (the exception being Under Armour Inc (NYSE:UA)) post trailing earnings multiples in the 20-23 range, which while still aggressive valuations are significant discounts to Lululemon Athletica inc. (NASDAQ:LULU). Of course, the principal driver of this gap is lululemon’s higher growth rates: in its most recent quarter, Nike’s revenue grew only 9% compared to the same period in the previous fiscal year while Columbia Sportswear Company (NASDAQ:COLM) actually experienced a decline in sales (we’d note that Columbia is another popular short target). NIKE, Inc. (NYSE:NKE), however, has been reporting higher net income numbers and could be worth a look. Gildan Activewear Inc (USA) (NYSE:GIL)’s revenue numbers have been quite strong, and analyst expectations imply a forward P/E of only 13. If it hits those targets, then the stock might qualify for “growth at a reasonable price.” That leaves Under Armour, which is quite similar to lululemon in terms of its financials and valuation: the trailing and forward P/Es are 47 and 31, respectively. Revenue numbers in its last quarterly report compared to the fourth quarter of 2011 were about even with what lululemon experienced, and earnings growth was close to 50% as well. 19% of Under Armour’s float is held short.

Under Armour and lululemon seem too dependent on future earnings growth for us to recommend buying- at their present valuation current growth rates would have to continue for several years. Gildan appears to be the most likely value prospect, though even there the company may be a bit speculative as the trailing earnings multiple is not particularly low and any value case is rooted in the business meeting analyst expectations over the next two years.

Disclosure: I own no shares of any stocks mentioned in this article.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!