Yahoo Finance Lululemon Athletica (NASDAQ:LULU) sheds 4.1% this week, as yearly returns fall more in line with earnings growth
Lululemon Athletica Inc. (NASDAQ:LULU) shareholders might be concerned after seeing the share price drop 14% in the last month. But that scarcely detracts from the really solid long term returns generated by the company over five years. In fact, the share price is 168% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Of course, that doesn't necessarily mean it's cheap now.
Since the long term performance has been good but there's been a recent pullback of 4.1%, let's check if the fundamentals match the share price.
Check out our latest analysis for Lululemon Athletica
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Lululemon Athletica achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is higher than the 22% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Lululemon Athletica's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
We're pleased to report that Lululemon Athletica shareholders have received a total shareholder return of 8.5% over one year. However, the TSR over five years, coming in at 22% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 3 warning signs for Lululemon Athletica (1 is significant) that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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