DCF Studio

    LULU · NMS · Consumer Cyclical

    lululemon athletica inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 328.89

    Market price

    USD 98.06

    Implied upside

    +235.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 6.8% of revenue against depreciation of 4.1%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 328.89+235.4%
    Exit multiple
    USD 181.40+85.0%
    Market price
    USD 98.06

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 12.3bnUSD 13.7bnUSD 15.2bnUSD 16.9bnUSD 18.7bn+11.0%
    EBITUSD 2.7bnUSD 3.0bnUSD 3.3bnUSD 3.7bnUSD 4.1bn+11.0%
    NOPATUSD 2.1bnUSD 2.4bnUSD 2.6bnUSD 2.9bnUSD 3.2bn+11.0%
    Add depreciation & amortisationUSD 500.1mUSD 555.3mUSD 616.6mUSD 684.7mUSD 760.2m+11.0%
    Less capital expenditureUSD -841.1mUSD -934.0mUSD -1.0bnUSD -1.2bnUSD -1.3bn+11.0%
    Less increase in working capitalUSD -65.6mUSD -72.9mUSD -80.9mUSD -89.8mUSD -99.7m+11.0%
    Free cashflow to firmUSD 1.7bnUSD 1.9bnUSD 2.1bnUSD 2.4bnUSD 2.6bn+11.0%
    Discount factor0.95620.87440.79950.73110.6685-
    Present valueUSD 1.7bnUSD 1.7bnUSD 1.7bnUSD 1.7bnUSD 1.8bn+1.5%
    Present Value Of The ForecastUSD 8.5bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.909Reported 0.864, pulled toward 1.0 (Blume)
    Cost of equity10.00%Risk-free + beta x equity risk premium
    Cost of debt7.00%Assumed: risk-free + 2bp (interest expense not reported)
    Market capitalisationUSD 10.9bn85.8% of capital
    Total debtUSD 1.8bn14.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.36%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 328.89

    78% of EV

    Forecast FCFF, final year
    USD 2.6bn
    Capex at depreciation, working capital in reinvestment
    USD 3.3bn
    Less reinvestment at g/ROIC (5.9% of NOPAT)
    USD -192.8m
    Capitalised
    USD 3.1bn
    ROIC (reported)
    42.3%
    Terminal value, undiscounted
    USD 45.8bn
    Terminal value, discounted
    USD 30.6bn
    Enterprise value
    USD 39.2bn
    Less net debt
    USD -8.8m
    Equity value
    USD 39.2bn

    Exit at 4.0x EBITDA

    Value per shareUSD 181.40

    60% of EV

    Terminal value, undiscounted
    USD 19.5bn
    Terminal value, discounted
    USD 13.1bn
    Enterprise value
    USD 21.6bn
    Less net debt
    USD -8.8m
    Equity value
    USD 21.6bn

    Spread between methods: 58%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.36%407.24435.52469.56511.35563.91
    8.36%345.50364.71387.16413.75445.77
    9.36%299.59313.26328.89346.95368.05
    10.36%264.14274.22285.55298.40313.09
    11.36%235.97243.60252.08261.54272.18

    Outlined: this model. Green text: above today's price of 98.06. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.0%-16.6%-27.6pp
    EBIT margin22.0%7.3%-14.7pp
    Discount rate9.4%24.3%+15.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.