Click here for a video analysis of Lululemon
Today we're going to look at Lululemon (LULU), which we've featured a number of times in recent years as it climbed the charts.
The company sells high-end yoga-themed clothing that's become popular in recent years. And it now offers running and cycling apparel.
- Sales growth ranged from 31% to 39% during the past three quarters.
- Earnings growth came in between 50% and 73% during the past four quarters — that's well above the 25% minimum growth you look for.
- Going forward, analysts see earnings rising 57% this year and 28% next year.
- The company also has a strong track record over the long-term, with a 5-year earnings growth rate of 72%.
- That helped it score a 99 EPS Rating. That rating compares its earnings to all other companies and the 99 score means its outperforming 99% of all other stocks.
- The Accumulation/Distribution Rating is an A-, so some big investors have been buying the stock.
- Lulu has had a huge run since 2009. For some of our more advanced readers who are concerned with base counts, remember that the bear market reset the base counts for all stocks.
- But also keep in mind that stocks that are leaders in one market uptrend, rarely go on to lead in the next one. So far, Lululemon is bucking that trend, but that's also something to consider.
- We last looked at Lululemon over the summer as the market was grinding through a correction. The stock had just sliced below its 50-day moving average line on heavy volume — which is a sign big investors were selling (Point 1).
- Lulu went on to form this long, irregular base (Point 2).
- It added a little handle to the base, then broke out past the 62.78 buy point in late Jan. (Point 3).
- After climbing a little, Lulu then formed this four-weeks-tight pattern (Point 4).
- To find the ideal buy point, add 10 cent to the peak in the pattern (Point 5). That makes the buy point 67.32.
- The stock tried to climb past that potential buy point early Friday morning (Point 6). So watch to see if it can hold onto those gains and break out. And also be on the lookout for heavy volume, which would show big investors are buying.
- Lululemon's 99 Composite Rating is the best among the 50 stocks in its Retail-Apparel/Shoes/Accessories industry group.
- The group itself is ranked No. 38 among the 197 groups IBD tracks.
