Not So Fancy About Lululemon Athletica inc. (LULU)

Is Gap a better buy?

Among the three companies, Gap is the cheapest valued. It is trading at around $41 per share, with the total market cap of around $19.1 billion. The market values Gap at only 7.2 times its forward EBITDA. The Gap Inc. (NYSE:GPS) has been trying to expand its footprint internationally. Recently, the company announced the new agreements with its existing franchise partners Neutral and Gottex Brands for the Paraguay and Hungary markets, respectively. It also announced that the first freestanding Banana Republic store will be opened at the end of 2013, along with its partner Distribuidora Liverpool. The company reported that in the past six years, it has built more than 300 franchise stores in 40 markets around the world. Looking forward, by the end of 2013, the company set the target to have its presence in eight Latin American countries such as Peru, Colombia, Paraguay, Panama, Brazil and Chile.

Income investors would prefer The Gap Inc. (NYSE:GPS) the most, as it is the only company paying dividends with a yield of 1.4%, while Lululemon and Under Armour Inc (NYSE:UA) do not pay any dividends.

My Foolish take

I would not touch Lululemon Athletica inc. (NASDAQ:LULU) now because of the unexpected CEO departure and its substantially high valuation. The Gap Inc. (NYSE:GPS), with a relatively low valuation and decent dividend yield, seems to be the stock for investors to hold in the long run at its current price. Moreover, the business expansion in the Latin American market would create a lot of upside for the company in the near future.

The article Not So Fancy About Lululemon originally appeared on Fool.com.

Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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