Right now, Lululemon Athletica Inc. LULU share price is at $325.52, after a 3.80% increase. Moreover, over the past month, the stock decreased by 14.73%, but in the past year, spiked by 69.84%. Shareholders might be interested in knowing whether the stock is overvalued, even if the company is performing up to par in the current session.

Assuming that all other factors are held constant, this could present itself as an opportunity for shareholders trying to capitalize on the higher share price. The stock is currently under from its 52 week high by 18.60%.

The P/E ratio is used by long-term shareholders to assess the company’s market performance against aggregate market data, historical earnings, and the industry at large. A lower P/E indicates that shareholders do not expect the stock to perform better in the future, and that the company is probably undervalued. It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.

Depending on the particular phase of a business cycle, some industries will perform better than others.

Compared to the aggregate P/E ratio of 27.79 in the Textiles, Apparel & Luxury Goods industry, Lululemon Athletica Inc. has a higher P/E ratio of 76.12. Shareholders might be inclined to think that Lululemon Athletica Inc. might perform better than its industry group. It’s also possible that the stock is overvalued.

There are many limitations to P/E ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.