Is lululemon athletica, Inc. overvalued or undervalued?

As of 6 June 2025, the valuation grade for lululemon athletica, Inc. has moved from attractive to very attractive, indicating a significant improvement in its valuation outlook. The company is currently considered undervalued, with a P/E ratio of 18, which is notably lower than its peer average, such as Amazon.com, Inc. at 36.48 and MercadoLibre, Inc. at 58.78. Additionally, lululemon's EV to EBITDA stands at 11.20, compared to Amazon's 18.48, further supporting the undervaluation thesis.
Key financial ratios highlight lululemon's strong performance, including a remarkable ROCE of 73.99% and an ROE of 42.88%. The PEG ratio of 1.03 suggests that the stock is reasonably priced relative to its growth potential. Despite recent stock performance trailing behind the S&P 500, with a year-to-date decline of 41.02% compared to a 2.44% increase in the index, the fundamental metrics indicate that lululemon is well-positioned for future growth and remains undervalued in the current market.