Trade-Ideas: Lululemon Athletica (LULU) Is Today's Strong On High Relative Volume Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Lululemon Athletica ( LULU) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Lululemon Athletica as such a stock due to the following factors:

  • LULU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $252.2 million.
  • LULU has traded 1.4 million shares today.
  • LULU is trading at 3.73 times the normal volume for the stock at this time of day.
  • LULU is trading at a new high 4.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on LULU:

lululemon athletica inc., together with its subsidiaries, designs, manufactures, and distributes athletic apparel and accessories for women, men, and female youth. It operates in three segments: Corporate-Owned Stores, Direct To Consumer, and Other. LULU has a PE ratio of 28.4. Currently there are 9 analysts that rate Lululemon Athletica a buy, 3 analysts rate it a sell, and 14 rate it a hold.

The average volume for Lululemon Athletica has been 2.3 million shares per day over the past 30 days. Lululemon has a market cap of $5.4 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.32 and a short float of 26.7% with 4.93 days to cover. Shares are down 20.9% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lululemon Athletica as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 13.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.39, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $53.01 million or 15.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.98%.
  • The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 53.99%. Regardless of LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LULU's net profit margin of 12.47% compares favorably to the industry average.
  • LULULEMON ATHLETICA INC's earnings per share declined by 15.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, LULULEMON ATHLETICA INC increased its bottom line by earning $1.91 versus $1.85 in the prior year. For the next year, the market is expecting a contraction of 7.3% in earnings ($1.77 versus $1.91).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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