lululemon athletica inc. (NASDAQ:LULU)

The valuation ratios demonstrate a consistent decline across the observed period. Generally, the multiples decreased from 2021 through the projected values for 2026, suggesting a decreasing premium investors are willing to pay for each dollar of the company’s earnings, operating profit, sales, and book value.

Price to Earnings (P/E)

The Price to Earnings ratio experienced a substantial decrease, moving from 70.19 in 2021 to a projected 11.66 in 2026. This represents a significant contraction in valuation based on earnings. The most pronounced decline occurred between 2021 and 2022, followed by a more gradual decrease through 2024, and then a sharper drop in the projected years.

Price to Operating Profit (P/OP)

A similar downward trend is evident in the Price to Operating Profit ratio. Starting at 50.41 in 2021, it decreased to 8.33 by 2026. The rate of decline was relatively consistent throughout the period, although the magnitude of the decrease was less dramatic than that observed in the P/E ratio.

Price to Sales (P/S)

The Price to Sales ratio also exhibited a declining pattern, decreasing from 9.39 in 2021 to 1.66 in 2026. There was a notable increase in the ratio from 2023 to 2024, before resuming the downward trend. This suggests that the market’s valuation of the company’s revenue has decreased over time, with a temporary deviation in 2024.

Price to Book Value (P/BV)

The Price to Book Value ratio showed a decrease from 16.16 in 2021 to a projected 3.71 in 2026. The ratio experienced fluctuations between 2021 and 2024, but ultimately followed the overall trend of decreasing valuation multiples. The most significant reduction is projected between 2024 and 2026.

Collectively, these ratios indicate a substantial shift in market perception of the company’s value. The consistent declines across all observed multiples suggest that investors are becoming less willing to pay a premium for the company’s financial performance, potentially reflecting changing growth expectations, increased competition, or broader macroeconomic factors.

The price to earnings (P/E) ratio exhibited considerable fluctuation over the observed period. Initially, the P/E ratio decreased from 70.19 in January 2021 to 45.11 in January 2022, indicating a potential correction or increased earnings relative to the share price. A slight increase to 47.65 was then noted in January 2023 before a further decline to 38.92 in January 2024. The most substantial decrease occurred between January 2024 and February 2025, with the P/E ratio falling to 22.71. This trend continued into February 2026, where the P/E ratio reached 11.66.

P/E Ratio Trend

The P/E ratio demonstrates a clear downward trajectory from January 2021 through February 2026. The initial high value suggests a premium placed on the company’s earnings, which diminished over time. The most significant reduction in the P/E ratio occurred in the latter part of the period, potentially reflecting changing investor sentiment, increased earnings expectations, or a decline in the share price relative to earnings.

Concurrent with the P/E ratio changes, earnings per share (EPS) generally increased. EPS rose from 4.52 in January 2021 to 7.62 in January 2022, experienced a slight decrease to 6.72 in January 2023, and then increased significantly to 12.30 in January 2024. Further EPS growth was observed in February 2025 (15.04) and February 2026 (13.66). Despite the increasing EPS, the P/E ratio decreased, suggesting that the share price did not increase at the same rate as earnings, or even decreased, particularly in the final two periods.

Relationship between Share Price, EPS, and P/E

While EPS generally trended upward, the share price movements did not consistently support a high P/E ratio. The share price increased from January 2021 to January 2024, but then decreased substantially in February 2025 and even more so in February 2026. This divergence between EPS growth and share price performance is the primary driver of the declining P/E ratio. The substantial drop in share price in the final two periods had a disproportionate effect on the P/E ratio, despite continued earnings.

The observed decrease in the P/E ratio, coupled with increasing EPS, could indicate that the market’s valuation of the company’s earnings has become more conservative. Alternatively, it could signal concerns about future growth prospects or increased risk factors not fully captured by current earnings figures. The significant decline in the share price during the final periods warrants further investigation to understand the underlying causes.

The Price to Operating Profit (P/OP) ratio exhibited a notable decreasing trend over the observed period. Initially high, the ratio declined consistently before experiencing a more significant drop in later years. This movement suggests a changing relationship between the company’s share price and its operating profitability.

Overall Trend

From January 31, 2021, to February 1, 2026, the P/OP ratio decreased from 50.41 to 8.33. This represents a substantial reduction, indicating that the market valuation relative to operating profit has diminished considerably.

Initial Decline (2021-2023)

Between January 31, 2021, and January 29, 2023, the P/OP ratio decreased from 50.41 to 30.66. This initial decline, while significant, was relatively gradual. It coincided with an increase in operating profit per share from US$6.29 to US$10.45, suggesting that the share price did not increase at the same rate as profitability during this period.

Acceleration of Decline (2023-2026)

The rate of decline accelerated from January 29, 2023, to February 1, 2026. The P/OP ratio fell from 30.66 to 8.33. This more rapid decrease occurred alongside continued growth in operating profit per share, reaching US$19.12 by February 1, 2026. The substantial drop in the ratio suggests a significant shift in investor sentiment or a reassessment of the company’s future growth prospects.

Impact of Share Price Fluctuations

The share price itself experienced fluctuations. It increased from US$317.09 in January 2021 to US$478.84 in January 2024, before declining sharply to US$159.27 by February 2026. This volatility in share price, coupled with the consistent growth in operating profit per share, heavily influenced the observed trend in the P/OP ratio.

In summary, the P/OP ratio demonstrates a clear downward trajectory, particularly pronounced in the later years of the observed period. This suggests that the market is placing a lower valuation on each dollar of operating profit generated by the company, potentially reflecting changing market conditions or company-specific factors.

The price to sales ratio exhibited a generally decreasing trend over the observed period, though with some fluctuation. Initial values were relatively high, followed by a period of decline, and then a significant drop towards the end of the observation window.

Overall Trend

From January 31, 2021, to January 28, 2024, the price to sales ratio decreased from 9.39 to 6.27, indicating a diminishing premium investors were willing to pay for each dollar of sales. However, a subsequent increase to 3.89 was observed by February 2, 2025, before a substantial decline to 1.66 by February 1, 2026.

Initial Decline (2021-2023)

The period between January 31, 2021, and January 29, 2023, saw a consistent reduction in the price to sales ratio, moving from 9.39 to 5.02. This suggests that sales growth did not keep pace with the share price during this time, or that investor expectations regarding future sales growth moderated.

Fluctuation and Subsequent Drop (2023-2026)

Following the low of 5.02 in 2023, the ratio increased to 6.27 in 2024. This was followed by a sharp decrease to 3.89 in 2025 and a further, more pronounced drop to 1.66 in 2026. This late-period decline coincides with a continued increase in sales per share, suggesting a significant decrease in the share price relative to sales.

Relationship to Sales per Share

Sales per share consistently increased throughout the period, rising from 33.77 in 2021 to 96.04 in 2026. The decreasing price to sales ratio, particularly in the later years, indicates that the market’s valuation of each dollar of sales diminished despite the growth in sales per share. This divergence suggests a shift in investor sentiment or a reassessment of the company’s growth prospects.

The observed pattern suggests increasing investor skepticism regarding the company’s ability to translate sales growth into shareholder value, or potentially reflects broader market conditions impacting valuation multiples.

The price to book value ratio demonstrates a fluctuating pattern over the observed period. Initially, the ratio exhibited relative stability, followed by a significant decline, and then a further decrease to a notably low level.

Initial Stability (2021-2022)

From January 31, 2021, to January 30, 2022, the price to book value ratio remained relatively consistent, fluctuating between 16.06 and 16.16. This suggests a stable market valuation of the company’s net asset value during this timeframe.

Moderate Decline (2022-2023)

A moderate decrease in the price to book value ratio was observed between January 30, 2022, and January 29, 2023, moving from 16.06 to 12.94. This indicates a lessening of the premium investors were willing to pay for the net asset value of the company.

Fluctuation and Subsequent Sharp Decrease (2023-2026)

The ratio increased to 14.26 as of January 28, 2024, before experiencing a substantial decline over the subsequent two years. By February 1, 2026, the price to book value ratio reached 3.71, representing a significant contraction from prior levels. This suggests a considerable divergence between the market price and the company’s book value, potentially indicating investor concerns regarding future performance or asset valuation.

Book Value Per Share Trend

Concurrently, book value per share consistently increased throughout the period, rising from US$19.63 in January 31, 2021, to US$42.92 in February 1, 2026. This upward trend in book value contrasts sharply with the declining price to book value ratio, further emphasizing the shift in market perception.

The observed trend suggests that while the underlying net asset value, as represented by book value per share, has been increasing, the market’s valuation of those assets has decreased considerably, particularly in the later years of the observed period.