I started running (marathon) as a hobby, and perhaps because I was consistent, my wife surprised me with a gift of running clothes. The moment I tried them on, I felt completely different from anything I had worn before. It was a comfortable sensation, as if my body and the running clothes had become one. "What brand is this?" This sparked my interest in the product.

BULGOM

Company Introduction

Dennis Chip Wilson began making snowboarding base layers, but one day he attended a yoga class and found the yoga clothes he wore to be very uncomfortable. With the desire to create comfortable yoga apparel, he founded the company in 1998. Initially, things didn’t go well. He had a two-story store in Vancouver, Canada, but couldn’t afford the rent, so he held yoga classes on the second floor. Perhaps because he provided customers with a unique "experience," the business took off, and in 2007, it went public simultaneously in the U.S. and Canada. Today, it holds a position in the yoga brand market similar to that of Chanel. Its main items include yoga wear, running clothes, training apparel, swimwear, and everyday clothing. Instead of simply expanding the number of stores based on past experiences, the company aims to create community hubs. (In Korea, there are running clubs and yoga classes operated in stores.) All information is publicly available on Yahoo Finance, where you can check the current status of Lululemon. (The bolded sections indicate tabbed areas.)

▲ Chip Wilson, Founder of Lululemon Athletica Inc.

SUMMARY

▲ Chart (Source: Yahoo Finance)

At the time of analysis, the market capitalization was $29.388 billion. The 52-week low was $110, and the high was $229. As the company still needs to focus on growth, it does not pay dividends. The target price was estimated at $220.70, but the stock price was already at $225.58, exceeding the target. A new target price will be set after the earnings announcement.

▲ Chart (Source: Yahoo Finance)

This is the chart for the last two years. There was a brief decline in late 2018, but overall, the trend has been upward. U.S. stocks often move according to earnings performance. Lululemon's earnings have consistently been strong, and the stock price has moved accordingly. Due to good earnings, the stock price gapped up on the day of the earnings announcement. In such cases, analysts often raise their target prices after each earnings report. Stocks are not like lottery tickets; behind every stock is a company. The stock price moves based on the company's performance and outlook.

Statistics

The trailing P/E ratio was 55.63, while the forward P/E ratio was 40.81. A lower forward P/E compared to the trailing P/E indicates that performance is expected to improve. (While P/E is an absolute investment criterion in Korean stock investing, it is merely a reference in U.S. stock investing.) The profit margin is 14.93%, and the operating margin is 21.23%. The return on assets (ROA) is 20.76%, and the return on equity (ROE) is 37.80%. All four figures are relatively high, indicating a well-performing company. The revenue over the past 12 months was $3.58 billion. Comparing this quarter's revenue to the same quarter last year, it increased by 22.10%, while net income rose by 0.50%. The company shows strong growth potential. The debt-to-equity ratio is 46.34%, which is below the 100% threshold.

1. Return on Assets (ROA) – Indicates how much net income a company achieves with its total assets. ROA (%) = (Net Income / Total Assets) x 100

2. Return on Equity (ROE) – A profitability metric that shows the profit generated from shareholders' equity. ROE (%) = (Net Income / Total Equity) x 100

Looking at the annual performance over the last five years, total revenue and operating income have shown consistent growth. Net income briefly declined in 2018 but saw a significant increase in 2019. Importantly, the overall trend has been upward.

Quarterly, the revenue in Q4 2018 (1/30/2019) showed explosive growth at $1.1 billion, largely due to Black Friday, a major sales season in the U.S. Revenue for Q4 2019 is also expected to grow significantly.

(Continued in Part 2)

After leaving Samsung C&T, I studied film production at the New York Film Academy. In 2010, I established Bulgom Stock Research Institute (www.bulgom.co.kr), publicly demonstrating stock investment methods over ten years, achieving an average selling return of 55% on 83 sold stocks over the past 114 months. I also conduct lectures related to U.S. stocks.

Author: <The Unbeatable Formula for Stock Investment by Bulgom>, <Beginner's Guide to Stock Investment by Bulgom>, <Following Bulgom's Value Investment>