Is Lululemon Stock Too Cheap to Pass Up?

Apparel institution Lululemon Athletica (NASDAQ: LULU) precocious reported earnings, and they did small to calm capitalist fears astir the business. Disappointing top-line numbers and a troubling forecast person resulted successful the banal hitting caller lows.

The institution has been struggling for a portion and has announced a caller CEO. A turnaround won't beryllium easy, but if it's successful, the banal could beryllium poised to present immoderate fantastic returns for investors who instrumentality a accidental connected the company. While determination is immoderate sizeable hazard with the stock, has it go truthful inexpensive that it's worthy buying close now?

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Lululemon reported minimal maturation past 4th

Lululemon reported its latest net numbers past week, and the results simply weren't good, and decidedly not what you'd expect from a apical maturation stock, which is what Lululemon utilized to be.

Revenue of $2.5 cardinal for the play ending May 3 was up 4% twelvemonth implicit year, but was conscionable 2% connected a constant-dollar basis. And its comparable income were lone up by 1%, which is simply a much utile indicator erstwhile assessing its integrated growth. With specified minimal growth, it's small wonderment wherefore investors person been dumping the banal this year. What was adjacent much worrisome, however, was that its nett income fell by 38% to $195 million.

In addition, the institution slashed its guidance for net per stock by implicit $1, present projecting a scope of $10.95 to $11.15 for the afloat fiscal twelvemonth (which ends astir February).

The banal is cheap, but is it truly conscionable a worth trap astatine this point?

Lululemon's worth has declined by much than 60% successful the past 5 years, with its marketplace headdress present astir $14 billion. Its price-to-earnings aggregate of 10 looks incredibly debased fixed that the mean banal connected the S&P 500 trades astatine a aggregate of astir 26.

That's a steep discount, but it begs the question of whether it's simply a worth trap. The concern isn't doing well, profits are down, and its quality to instrumentality to maturation is by nary means a certainty, peculiarly astatine a clip erstwhile there's rising contention and consumers are much delicate to price.

New CEO Heidi O'Neill has a beardown pedigree, with decades of acquisition astatine Nike, but a turnaround for Lululemon won't beryllium easy. Unless you person a precocious tolerance for hazard and a full batch of patience, you whitethorn beryllium amended disconnected avoiding Lululemon's banal because, portion it whitethorn look cheap, there's nary warrant that it can't spell lower. It's inactive a highly risky bargain astatine this point.