Lululemon Athletica inc. (LULU) Has Recovered & It’s Poised to Get Better

To top it all off, Lululemon’s balance sheet is pristine. They have $590 million in cash and only $164 million of total liabilities, none of which are long-term notes. Lululemon Athletica inc. (NASDAQ:LULU) has plenty of capital to continue its expansion, both in store locations and on-line presence.

The competition

The two most well-known competitors to Lululemon are NIKE, Inc. (NYSE:NKE) and Under Armour Inc (NYSE:UA) . Nike, obviously, is a much larger company and has more things to worry about than just making yoga apparel. Nonetheless, it is a competitor to Lululemon in that NIKE, Inc. (NYSE:NKE) provides an athletic clothing alternative to wearing Lululemon’s yoga-specific attire. Nike is off to a great start in 2013, providing investors with an almost 20% return, more than double the S&P 500.

Under Armour is in a similar boat to NIKE, Inc. (NYSE:NKE), only with about 10% of Nike’s market capitalization. Under Armour is a competitor to Lululemon by providing a clothing alternative to its yoga attire. Under Armour Inc (NYSE:UA) is also off to a great start in 2013, as the stock has risen almost 15%. Nike and Under Armour Inc (NYSE:UA) are both good investments. Nike provides investors with the additional stability of a well-established brand and a 1.4% dividend yield. Under Armour is a less mature, but faster growing company that could provide investors with significant gains if it can continue to grow at a rapid pace.

Among these three companies, I like Lululemon the best. It has a great market share in a niche market and also has the opportunity to expand further outside of the yoga market as it grows. Competition isn’t a huge concern yet. While all competitors can offer alternative products, there aren’t many who offer customers a yoga-specific product competition, and no one has done it as successfully as Lululemon yet.

The bottom line

I put Lululemon on the list of 10 Stocks for 2013 and I’m certainly not backing away from it. It got off to a rough start with the sheer pants issue, but has rebounded nicely. The financials look great and the valuation is solid. Lululemon continues to grow with no signs of slowing yet. Hopefully, the market will provide us with another nice dip as a buying opportunity.

The article This Stock Has Recovered, and Is Poised to Get Better originally appeared on Fool.com.

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