Before I begin discussing Under Armour, Inc. (UA) please note the following:
- I’m not an investment advisor
- I don’t consider myself an investment professional
- I don’t have formal investments training
- I’m not getting paid by UA or anyone else for writing this
- I am not on the board or affiliated with UA (I do own some of their stock, however).
So you may be saying to yourself, “why should I bother reading this analysis?” Well, because it’s a simple and straightforward analysis, without a bunch of technical and financial data. And it may help you decide if UA is worth including in your already awesome investment portfolio. And with that, let’s dive in!
UA designs sports clothing and accessories. It has been around since 1996 founded by Kevin Plank, CEO, who’s from Maryland and so is UA Headquarters. Its market capitalization is almost $9B, which makes it a large-cap company.
So Why Am I Analyzing Under Armour’s Stock
Well, a couple of reasons. I want to actually write down the reasons why I decided to invest in it. Sometimes things make more sense once you put them in writing. And I want to see how I fare as a stock picker when I read this post several years down the line (this means that I am a long-term investor). And as much as I am tempted, I do not like to look at stock prices on a daily basis.
Anyway, reason number one for my purchase of UA stock is potential growth. As mentioned, UA has a market cap of almost 9B. Its competitors like Nike has almost 90B and Adidas almost 34B. I don’t know if UA will ever get to that level, but I think it has a lot of upsides.
Another aspect of this potential growth/upside is over the past few years, UA has received the endorsements of some major athletes including Bryce Harper, Cam Newton, Michael Phelps, Tom Brady, and many more. For a full list, see Baltimore Sun.
Reason number two for my UA stock purchase is revenue growth. Per the chart below, revenue has gone up and net income has gone up from 2015:
Currently, UAA is trading at $20.71 with a P/E ratio of 46.1 (Per Investopedia “P/E ratio divides a stock’s share price by its earnings per share to come up with a value that represents how much investors are willing to shell out for each dollar of a company’s earnings.”
As compared with Adidas and Nike which have P/E’s of and 33.20 and 23.30 respectively, there is a greater demand for the purchase of UAA stock as investors are expecting faster growth….onward and upward!
UA recently lost a lot in terms of its stock price with declining sales a large amount of inventory on hand. But, it has a huge opportunity to expand globally. Per The Motley Fool, “Nike currently gets just over half of its sales from outside geographies, which helps explain why Under Armour executives are so bullish about their long-term prospects.” Another aspect of UA’s business is footwear sales, which have grown from 678M to 998M between 2015 and 2016 (Motley Fool Info.).
For a growth-oriented and long-term investor like myself, UA provides greater potential, but at the same time comes with greater risk and volatility.
UAA University Contracts
Currently, UA has sport clothing contracts with a few big Universities. Out of the top 10 Universities, UA has a contract with 4 out of 10 including Wisconsin, Notre Dame, Auburn, and South Carolina. However, the top 3 universities make up almost half (44%) of the total of the top 10 contracts (see below and full article from Forbes at College Contracts
So yeah, BIGTIME upside potential again!
From my personal experience as a consumer, I own a few pieces from UA and they all are of superb quality. My first was actually a gift from my brother, a black full zip hoodie. I have worn it, heavily, for over 10 years and still going strong. Unlike other hoodies that I’ve owned in the past and gotten rid of, this one has maintained its shape, durability, and continues to keep me warm and block air. The bottom line is that I’ve never owned a hoodie for this long.
Recently I bought a pair of UA running shoes that I wear to my work gym. I kid you not, they are super-light and feel like I’m wearing an airy sweater on my feet!
Whether UA stock is right for you or not is something you would have to determine for yourself based on your investment goals and style. Nevertheless, I hope the presentation of some facts and a taste of my personal experience of this organization can help you make an informed investment decision.
Join the discussion:
- Do you own UA stock? Have you increased or decreased your position over time?
- How would you rate UA’s products as compared with other sporting gear providers?
- Where do you see UA in the long-term (i.e.,10 or more years from now)?