The founder of Lululemon Athletica inc. (Nasdaq: LULU) sold 2.75 million shares of stock over the last three trading days. It’s worth taking a closer look at the company with the stock trading at such a rich valuation.
Insider Selling: Lululemon Athletica inc.
Dennis Wilson is the Founder of Lululemon and served as its Chief Innovation and Branding Officer until January 29th, 2012. A recent form 4 filing with the SEC revealed that Mr. Wilson sold 1,200,000 shares of the company worth a total of $91.1 million on Wednesday, February 14th.
What’s more interesting in fact, Dennis Wilson has sold $211.0 million worth of stock since Monday, February 12th according to recent SEC filings. That’s roughly 1.9% of the company’s total market capitalization.
|Insider Trading||Relationship||Date||#Shares||Value ($)|
|Dennis Wilson||Founder||Feb 14||1,200,000||$91,104,000|
|Dennis Wilson||Founder||Feb 13||827,866||$63,952,649|
|Dennis Wilson||Founder||Feb 12||722,134||$55,943,571|
Lululemon Athletica inc.’s Stock Price and Valuation
The company’s shares last traded at $81.22 as of Wednesday, approximately 97.5% of its 52-week high. The stock is up an impressive 37.8% over the last six months.
While the stock trades near its high, could the recent insider transaction signal that tough times are ahead for shareholders?
Finbox.io applies pre-built valuation models to calculate a fair value for a given stock and uses consensus Wall Street estimates for the forecast when available. The company’s average fair value of $65.06 implies -19.9% downside and is calculated from 10 separate analyses as shown in the table above.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$59.91||-26.2%|
|5-yr DCF Revenue Exit||$59.79||-26.4%|
|Peer Revenue Multiples||$47.52||-41.5%|
|10-yr DCF EBITDA Exit||$73.64||-9.3%|
|5-yr DCF EBITDA Exit||$77.38||-4.7%|
|Peer EBITDA Multiples||$60.12||-26.0%|
|10-yr DCF Growth Exit||$78.44||-3.4%|
|5-yr DCF Growth Exit||$83.54||2.9%|
|Peer P/E Multiples||$55.07||-32.2%|
|Earnings Power Value||$55.21||-32.0%|
While insider activity on its own is not necessarily a buy or sell signal, it may offer insight into how ownership and management feel about a company’s future prospects. Keeping an eye on the activities of insiders and institutions can help investors make more informed investment decisions.
I recommend you continue to research Lululemon Athletica inc. to get a more comprehensive view of the company by looking at:
Valuation: what is Lululemon’s short ratio and how does it compare to its publicly traded peers? It represents the percentage of total shares outstanding that is being shorted. View the short ratio here.
Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Lululemon’s return on equity here.
Forecast: what is Lululemon’s projected earnings growth? Is the company expected to grow faster or slower relative to its peers? Analyze the company’s projected earnings growth here.
Author: Matt Hogan
Expertise: Valuation, financial statement analysis
Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.
Matt can be reached at firstname.lastname@example.org.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.