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Lululemon Athletica Inc. (LULU) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Lululemon Athletica Inc. (LULU)

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Intrinsic Value (DCF)

Current$205.01
→
Intrinsic$443.55
+116%
$303.07$443.55$710.11
Market implies 5% growth for 5 years
DCF analysis suggests LULU could have 116% upside at 24% growth — verify assumptions match your view.
At $205, the market prices in only 5% growth — below historical 24%, suggesting low expectations.
Range: Bear $303 → Bull $710. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →20%22%24%26%
8%$544$588$635$684
10%$382$412$444$477
12%$292$314$338$363
14%$235$253$271$291

Bull Case

  • Bull case ($710) offers 246% upside at 29% growth, 9% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (5%) ≤ historical CAGR (24%)

Bear Case

  • Bear case ($303) with 19% growth, 12% discount rate
  • Using 24% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$1.97B
Year 2$2.45B
Year 3$3.04B
Year 4$3.78B
Year 5$4.70B
Terminal$69.19B

📐 Model Inputs

Growth Rate24.3%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.58BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is LULU stock undervalued or overvalued?
🟢 UNDERVALUED

LULU trades at $205.01 vs. our DCF-derived intrinsic value of $377.33, implying +75% upside. At a 10.0% WACC and 24.3% projected FCF growth, the market appears to be underpricing the present value of LULU's future cash flows. The bear case ($248.63) still suggests upside, providing margin of safety.

What is LULU's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.58B, projected at 24.3% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-409M net debt and dividing by 0.12B shares: Bear $248.63 | Base $377.33 | Bull $566.87. Current price $205.01 implies +75% to base case.

How is LULU's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 24.3% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($46.36B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.