Under Armour Stock Analysis: Is Under Armour Over Priced?


Gabriel Segall is a Intern Financial Analyst at I Know First

Under Armour Stock Analysis: Summary

  • Under Armour Stock: Buy, Hold or Sell?
  • Lowe FS Purchases $232,000 in Under Armour Inc. Shares
  • Under Armour Inc: Why UA Stock May Have a MISERABLE Q4

Under Armour Inc. focuses in the development, marketing and distribution of sport clothing, footwear and accessories. Their designs can be used in any type of climate. They operate in North America, including of the United States and Canada; Europe, the Middle East, Africa, Asia-Pacific and Latin America. The Company also offers digital fitness platform licenses and subscriptions, along with digital advertising through its MapMyFitness business.

Wizards v/s Warriors 03/02/11

Source: Google Images

UA Stock Valuation

One of the biggest challenges of analyzing growth stocks is that they often do not report consistent free cash flow or EPS and this makes it harder to give a valuation. UA is one of these difficult to value growth stocks. But let’s try anyway.

Growth prospects

Before giving it a try to valuate the company we should first analyze their current growth as well as future growth. After all, every asset’s intrinsic value is ultimately worth the present value of a practical estimate of future cash flows

Under Armlour is expecting to increase their revenues by 27% compared to last year. They are also expecting to increase operating income by 15%. Looking in the future of the company, management is expecting that annual revenues will reach $7,5 billion by 2018. This would be a huge annual increase.


Source: Under Armour


An easier way for investors to understand the value of UA is to see what price to an estimated operating income multiple in the future would need to trade at in order for investors to earn a reasonable return on investment from today’s stock price. After doing the calculation the can compare the numbers with competitors such as Nike to check the sensitivity of the multiple.

So lets ask ourselves what would we a comfortable multiple so that investors can make an average annualized return of 10% in the next 5 years. If we make the calculation the stock would have to be valued at $148 for this to happen. We can also take into account that if the company increases their operating income by 15% annually this would give a multiple of 42. This means that a $148 stock price in these five years would put shares at more or less 42 times per share operating income. If we compare it with Nike, the number is much bigger is the giant footwear company has a multiple of 26.

We can now realize that Under Armour has priced considering a bright future. But even considering this it would still trade at a premium if we compare it with Nike. Investors have to take their time and make a deeper study about the company before deciding what directions to take.

Lowe FS Decision to Buy $232k of UA Stocks

Lowe FS has decided to increase its equity in UA by 30.1% according to its most recent disclosure with the Securities and Exchange Commission (SEC). The firm had 2,394 shares in its portfolio after buying an additional 554 shares during the period. UA stocks equals to about 0.2% of the company’s portfolio, making the stock its 29th largest position.

Recently research analysts gave their report of UA shares. Canaccord Genuity gave a buy rating and a price target of $105. Vetr changed theirs to strong-buy and a target price of $106.07. Piper Jaffray restated a buy rating and a set a price of $113 as target. The last one was Barclays that gave an overweight rating and gave a positive price target of $110. Only one research analyst gave a sell rating, 12 gave it a hold and 21 gave them a buy rating. The stock has an average rating of buy and price target of $104.25.


Source: Google Finance

At the moment the company is doing well as it increased 0.81% on Tuesday reaching a price of $87.28. Their 52 high low is $63.77-$105.89. UA market caps stands at $18.93 billion and has a P/E of 89.6. Their last earnings report was on October 22nd. They reported $0.45 EPS against an estimate of $0.44. They had revenue of $1.2 billion compared to an estimate of $1.17 billion. They increased revenues by 28.4% compared to same period last year. On average, analysts expect UA will post an EPS off $1.05 for the current fiscal year.

The Pressure of UA for the Q4

As we know to this point the stock is trading at a premium and the company will be in a lot of pressure during the holiday season to justify its price. “The story has been revised to reflect the fact that Piper Jaffray analyst Erinn Murphy was concerned that high inventory would mean more promotional discounting from Under Armour in the weeks following Cyber Monday”.

The stock has rewarded loyal investors in the long term as we can clearly see that in the recent years the stcoks has had a big growth. Between 2010 and 2014, the UA revenue roughly tripled, going from $1.06 billion to $3.08 billion.

Another important decision that the company made was to sign Stephen Curry and Jordan Spieth. Both had breakout seasons and the multiyear endorsement deals helped the stock go up 27% this year.

One research analyst that has been hard with Under Amour is Erinn Murphy who cut her price target on UA stock to $88 per share from $97 per share on Monday Nov 30th, and lowered her Q4 earnings-per-share estimate from 46 cents to 44 cents per share. Her reason was that the company might give discounts in the next weeks because of high volume of inventory. It had sales of up to 25% during Black Friday and Cyber Monday.


Source: Google Images

Some people might think this is a desperate move to clear inventory but at the moment I do not agree with this statement.

With out counting recent news Under Armour has very high multiple and I think the stock will go down by small percentage because if we also compare it to its competitors it’s overvalued. 

Algorithmic Analysis


Above we can see I Know First’s algorithmic forecast for Under Armour over the periods of 3 months, and 1 year. Our system outputs the predicted trend as a number, positive or negative, along with the wave chart that predicts how the waves will overlap the trend. This helps the trader decide which direction to trade, at what point to enter the trade, and when to exit.

As we can see, Under Armour is among our Top 10. The stock has a strong, bullish signal for both, indicating that the stock is currently very undervalued.


Source: Google Images


To conclude I just want to say that I really like the apparels made by Under Armour. I think they bring a new style and quality to sport clothes and footwear. To talk about the discounts during Black Friday I do not think this something to be worried about and most investors will not be affected by this decision. For last I think that in the upcoming weeks the stock price will go down by small percentage unless they beat expectations by the end of the quarter. This is because even with all the positive news about UA the multiplier is just to high for what the operating income is at the moment. Moreover, the I Know First algorithm is bullish on this stock in the long term, with a bullish algorithmic forecast to support the fundamental analysis of Under Armour Inc. (NYSE:UA) stock.