Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Lululemon Athletica Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from -0.6% to 6.1% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 11, DPO 27, DIO 130). At a 8.4% WACC with mid-year discounting, the terminal value (87% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 18.8x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $462.17 per share, suggesting LULU is undervalued by 202.4% at the current price of $152.85.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 2,212 | 2,300 | 2,405 | 2,526 | 2,679 | 2,746 |
| (−) Net Interest | 221 | 230 | 240 | 252 | 267 | 274 |
| (+) D&A | 611 | 680 | 707 | 738 | 770 | 789 |
| EBITDA | 3,044 | 3,210 | 3,352 | 3,516 | 3,716 | 3,809 |
| (−) Tax | 666 | 692 | 724 | 760 | 806 | — |
| (−) CapEx | 742 | 771 | 807 | 847 | 899 | — |
| (−) ΔWC | 99 | 66 | 79 | 91 | 115 | — |
| Free Cash Flow (FCF) | 1,537 | 1,680 | 1,743 | 1,818 | 1,896 | — |
| Peers' EBITDA Multiple | 18.8x | |||||
| Terminal Value | 71,683 | |||||
| WACC / Discount Rate | 8.38% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,477 | 1,489 | 1,425 | 1,372 | 1,320 | 47,946 |
| Enterprise Value | 55,029 | |||||
| Projection Period | 7,083 | 12.9% | ||||
| Terminal Value | 47,946 | 87.1% | ||||
| (−) Current Net Debt | (9) | |||||
| Equity Value | 55,038 | |||||
| (÷) Outstanding Shares | 119M | |||||
| Fair Price | $462 | +202.4% | ||||
| WACC \ EV/EBITDA Exit Multiple | 14.8x | 16.8x | 18.8x | 20.8x | 22.8x |
|---|---|---|---|---|---|
| 6.4% | $410 | $457 | $504 | $551 | $598 |
| 7.4% | $393 | $438 | $483 | $527 | $572 |
| 8.4% | $377 | $419 | $462 | $505 | $548 |
| 9.4% | $361 | $402 | $443 | $484 | $525 |
| 10.4% | $346 | $385 | $424 | $463 | $503 |
Current price: $152.85. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.