This Once-Booming Stock Is Down 78% From Its All-Time High. Here's 1 Reason to Consider Buying Now.
Key Points
This consumer discretionary stock trades at a cheap forward price-to-earnings ratio of 10.6.
Revenue growth has slowed, but the company remains consistently profitable.
Even in what appears to be a frothy market environment, investors can find beaten-down stocks to analyze. For instance, shares in this apparel company recently traded at a gut-wrenching 78% off their record from December 2023 (as of June 29).
But it wasn't always this way. This consumer discretionary stock soared 321% in the five-year run leading up to that peak.
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Here's one reason you might want to consider buying shares today.
Image source: Getty Images.
Lululemon Athletica (NASDAQ: LULU) has done a fantastic job losing the market's conviction. The stock has gotten so crushed that the valuation is hard to ignore now. Investors can buy shares at a forward price-to-earnings ratio of just 10.6, less than half the S&P 500 index's multiple.
Lululemon's growth has weakened dramatically. Revenue increased 4% in the first quarter of fiscal year 2026 (ended May 3), with sales in the critical U.S. market down 4%, likely due to a combination of competitive forces, disappointing product releases, and inflationary pressures.
The rational perspective, after learning that the stock has lost three-fourths of its value, is that this is a dying business. That's not true.
Lululemon still reports robust profitability, with a gross margin of 54.2% last fiscal quarter. Its brand name, known for premium merchandise, is a key competitive advantage. And it possesses long-term growth potential, especially in China.
If you're a patient investor willing to hold for five years or longer, Lululemon deserves some attention.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.
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