We recently published a list of 12 High Growth Non-Tech Stocks That Are Profitable in 2025. In this article, we are going to take a look at where Lululemon Athletica Inc. (NASDAQ:LULU) stands against other high-growth non-tech stocks that are profitable in 2025.
What to Expect From the Market in Q2 2025?
On March 27, David Sekera, CFA, chief US market strategist at MorningStar released his Q2 2025 market outlook. He highlights that the market was priced to perfection at the start of the year, trading at a rare premium to its fair value. He advised investors at the start of the year to overweight value stocks, which were attractively priced while underweighting growth stocks that were significantly overvalued. This advice proved prescient as the Morningstar US Market Index fell by 1.74% through March 24, with losses concentrated in growth and core stocks. This was particularly true for stocks linked to artificial intelligence, which dropped by 3.79% and 3.52%, respectively. In contrast, value stocks gained 4.59%, showcasing their resilience.
Sekera noted that as of March 24, the US equity market had declined to a price/fair value ratio of 0.95, representing a 5% discount to Morningstar’s fair value estimates. Moreover, growth stocks experienced a sharp correction, reducing their premium from 24% at the start of the year to just 3%. On the other hand, despite their recent gains, value stocks became even more undervalued, trading at a 13% discount to fair value. He emphasizes that this has made value stocks the most attractive investment category for the year. His outlook also addresses market dynamics by capitalization. He recommends overweighting small-cap stocks due to their significant undervaluation at an 18% discount to fair value. However, he cautions that small-cap performance might not materialize until later in the year when economic conditions improve and monetary policy becomes more accommodative. Conversely, large-cap and mid-cap stocks are less appealing as they are trading at similar discounts to the overall market.
Moreover, monetary policy plays a central role in Sekera’s analysis. Morningstar’s economics team forecasts three federal funds rate cuts in 2025 and anticipates a gradual economic rebound starting in early 2026. While long-term interest rates are expected to remain stable initially, they are projected to enter a multiyear downward trend later in 2025. He also addressed misconceptions about market sell-offs being driven by tariffs. Instead, he attributed much of the downturn to a concentrated sell-off in AI-related stocks. According to Morningstar’s analysis, losses from just ten highly AI-correlated stocks outweighed overall market declines, with seven of these being among the top-performing stocks in 2024.
Our Methodology
To curate the list of 12 high-growth non-tech stocks that are profitable in 2025, we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance as our sources. Using the screener we aggregated a list of non-tech stocks that have grown their revenue and net income by more than 15% over the past 5 years. Next, we cross-checked the 5-year sales growth and net income from Seeking Alpha. We also checked for TTM net income from Yahoo Finance and only added companies that had a TTM net income of more than $500 million. Lastly, we ranked the stocks in ascending order of the number of hedge fund holders, sourced from Insider Monkey’s Q4 2024 database. Please note that the data was recorded on March 28, 2025. Also note that for some companies the TTM net income was mentioned in foreign currencies, in such cases it was manually converted to USD. The conversion rates are as of March 28, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A store employee in an athletic apparel store restocking merchandise.
Lululemon Athletica Inc. (NASDAQ:LULU)
5-Year Sales Growth: 22.12%
5-Year Net Income Growth: 25.12%
TTM Net Income: $1.74 Billion
Number of Hedge Fund Holders: 60
Lululemon Athletica Inc. (NASDAQ:LULU) specializes in designing, manufacturing, and distributing technical athletic apparel, footwear, and accessories. It operates across four main regions including the Americas, China Mainland, Asia Pacific, Europe, and the Middle East.
On March 19, Morgan Stanley analyst Alexandra Straton maintained a Buy rating on the stock, with a price target of $411. Straton highlighted the possibility of an upside in Lululemon Athletica Inc. (NASDAQ:LULU) earnings per share for Q4 2024 driven by its newness-driven strategy. During the fiscal fourth quarter of 2024, the company grew its revenue by 13% to $3.6 billion. The growth was driven by a robust performance by the International segment which grew 38% during the same time.
Moreover, Diamond Hill Large Cap Strategy mentioned Lululemon Athletica Inc. (NASDAQ:LULU) in its Q4 2024 investor letter, stating that it was one of the firm’s top individual contributors during the quarter, reflecting positive performance. The fund emphasized the company’s position as a leading technical apparel brand with strong affinity in the Americas and a growing international presence. It is one of the high-growth non-tech stocks that are profitable in 2025.
Diamond Hill Large Cap Strategy stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q4 2024 investor letter:
“Among our top individual contributors in Q4 were General Motors and new position Lululemon Athletica Inc. (NASDAQ:LULU). Lululemon is a leading technical apparel brand with strong affinity in the Americas and a growing international presence. As competition in the US has increased, investors have questioned whether the brand faces structural challenges — particularly as sales have also slowed recently. However, we believe these challenges in the US are primarily transitory and that lululemon will be able to sustain its margins. Further, we believe lululemon is a high quality, cash-generative company with a clean balance sheet — consequently, we capitalized on what we view as an attractive discount to our estimate of intrinsic value to initiate a position in the quarter. Shares rose in Q4 as the consumer environment in the Americas stabilized, international growth remains outsized and margins have proven resilient.”
Overall, LULU ranks 3rd on our list of best aerospace and defense stocks to buy according to analysts. While we acknowledge the potential of LULU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LULU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.