Stock (Symbol) |
Under Armour (UA) |
Stock Price |
$31 |
Sector |
| Retail & Travel |
Data is as of |
| November 3, 2016 |
Expected to Report |
| Jan 26 – 30 |
Company Description |
 UA is engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth. The Company’s moisture-wicking fabrications are engineered in a range of designs and styles for wear in nearly every climate to provide an alternative to traditional products. UA operating segments include North America, consisting of the United States and Canada; Europe, the Middle East and Africa (EMEA); Asia-Pacific; Latin America, and MapMyFitness. The Company also offers digital fitness platform licenses and subscriptions, along with digital advertising through its MapMyFitness business. Its apparel offers three gearlines, including HEATGEAR, COLDGEAR and ALLSEASONGEAR. Its footwear offerings include football, baseball, lacrosse, softball and soccer cleats, slides and performance training, running, basketball and outdoor footwear. Its accessories primarily include the sale of headwear, bags and gloves. Source: Thomson Financial |
Sharek’s Take |
Under Armour (UA) dropped from $38 to $31 after it reported earnings, with the main reason being the P/E was 65 and that was way too high. Under Armour got its enormous P/E because has fantastic growth opportunity as the company expands its growing divisions across the globe. Last qtr International revenue grew 74% but still accounts for just 15% of sales. Footwear was also solid last qtr, as sales grew 42%. Overall, total sales have increased from $3 billion two years ago to $4 billion last year and are expected to hit $5 billion this year — then $6 billion next year. The company also boasts 19 consecutive years of revenue growth. Although analysts can chime in on why UA fell, it really comes down to three things.
With UA now down to $31, it sells for 45x 2017 earnings estimates (which just fell). So the stock still isn’t on sale, it’s just fairly valued here. But with Adidas taking share and single-digit profit growth expected the next 2 qtrs, I’m in no rush to buy. UA is on my radar. |
‘One Year Chart |
 This is a bad looking one-year chart. And the stock broke through support at $32 so it may go lower — it looks like its going lower! Nike’s chart also looks bad, so its safer to be on the sidelines for now. Last qtr sales increased 22% as profits rose 26%. The big negative here is Annual Profit Estimates have fallen the past 2 qtrs:
2016 from $0.67 to $0.59 and now $0.60 UA made $0.53 in 2015 and is expected to make $0.69 two years after. That’s slow profit growth. Qtrly profit Estimates are just 4%, 0%, 200% (e-z comparisons) and 7%. |
Fair Value |
 My Fair Value is 45x earnings which is $31 for 2017. I’m being very generous with that valuation, as the numbers we just analyzed aren’t good. Also, that is 2017’s estimate, which means I feel the stock will be that price next year. Another point to consider is this is an apparel/shoe company which historically don’t do well in recessions. Although I don’t see a recession on the horizon, that does take down the certainty factor. |
Bottom Line |
 Under Armour has growing like a weed but is having issues presently that brought down the stock from its lofty perch. But in the end profit growth leads to stock growth and both profits and the stock price have increased 18% a year the last decade. I have UA on my radar but am being cautious here as the stock could continue to fall. Still, this company has great growth opportunity so I consider it a must own, I just don’t know when I will own it. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
