Under Armour, Inc. is a well-known American sports apparel and footwear company that has been a major player in the athletic wear market for over two decades. Founded in 1996 by Kevin Plank, the company has grown significantly over the years, with a brand portfolio that includes Under Armour, Curry, and HOVR. However, like any other publicly traded company, Under Armour’s stock performance has experienced its fair share of ups and downs, leaving investors to wonder if it’s a good investment opportunity.
Under Armour’s Business Overview
Before we dive into the investment analysis, it’s essential to understand Under Armour’s business model and its position in the market. Under Armour is a leading designer, marketer, and distributor of authentic athletic footwear, apparel, and accessories. The company’s products are designed to provide high-performance capabilities, comfort, and style, catering to a wide range of consumers, from professional athletes to fitness enthusiasts.
Under Armour’s business is divided into three main segments:
- Apparel: This segment accounts for the majority of the company’s revenue and includes products such as tops, bottoms, outerwear, and accessories.
- Footwear: This segment includes performance and lifestyle footwear products, such as running, basketball, and cleated shoes.
- Accessories: This segment comprises products such as hats, bags, and gloves.
Key Growth Drivers
Under Armour has several key growth drivers that contribute to its success:
- Innovative Products: Under Armour is known for its innovative products, such as the Curry basketball shoe line and the HOVR running shoe line. These products have been well-received by consumers and have helped drive sales growth.
- Strategic Partnerships: Under Armour has partnered with several high-profile athletes, including Stephen Curry, Tom Brady, and Jordan Spieth. These partnerships help increase brand awareness and drive sales.
- Global Expansion: Under Armour has been expanding its global presence, with a focus on Asia-Pacific and Latin America. This expansion has helped drive sales growth and increase brand awareness.
Financial Performance
Under Armour’s financial performance has been mixed in recent years. The company has faced increased competition from rivals such as Nike and Adidas, which has put pressure on its sales and profitability.
| Year | Revenue (in billions) | Net Income (in millions) |
|---|---|---|
| 2015 | $3.96 | $233 |
| 2016 | $4.83 | $256 |
| 2017 | $5.27 | $157 |
| 2018 | $5.27 | $122 |
| 2019 | $5.27 | $172 |
As shown in the table above, Under Armour’s revenue has been relatively flat in recent years, while its net income has been volatile. The company has faced challenges in its North American market, which has been impacted by increased competition and changing consumer preferences.
Valuation
Under Armour’s valuation is a key consideration for investors. The company’s stock price has been volatile in recent years, and its valuation multiples have been impacted by its mixed financial performance.
| Multiple | Under Armour | Nike | Adidas |
|---|---|---|---|
| Price-to-Earnings (P/E) Ratio | 25.6 | 30.4 | 24.1 |
| Price-to-Sales (P/S) Ratio | 1.4 | 3.4 | 1.3 |
As shown in the table above, Under Armour’s valuation multiples are relatively low compared to its peers. The company’s P/E ratio is lower than Nike’s, while its P/S ratio is lower than Adidas’. This suggests that Under Armour’s stock may be undervalued relative to its peers.
Investment Thesis
Based on our analysis, we believe that Under Armour is a good investment opportunity for several reasons:
- Undervalued Stock: Under Armour’s stock is undervalued relative to its peers, with a lower P/E ratio and P/S ratio.
- Strong Brand: Under Armour has a strong brand with a loyal customer base, which provides a competitive advantage.
- Innovative Products: Under Armour has a history of innovation, with products such as the Curry basketball shoe line and the HOVR running shoe line.
- Global Expansion: Under Armour has opportunities for growth through global expansion, particularly in Asia-Pacific and Latin America.
However, there are also risks to consider:
- Increased Competition: Under Armour faces increased competition from rivals such as Nike and Adidas, which could impact its sales and profitability.
- Changing Consumer Preferences: Under Armour’s sales could be impacted by changing consumer preferences, such as a shift towards sustainable and eco-friendly products.
Risk Management
To manage these risks, investors could consider the following strategies:
- Diversification: Investors could diversify their portfolio by investing in a range of stocks, including those in different industries and sectors.
- Stop-Loss Orders: Investors could use stop-loss orders to limit their losses if the stock price falls below a certain level.
- Regular Portfolio Rebalancing: Investors could regularly rebalance their portfolio to ensure that their investments remain aligned with their investment objectives and risk tolerance.
In conclusion, Under Armour is a good investment opportunity for investors who are looking for a strong brand with a loyal customer base and opportunities for growth through global expansion. However, investors should be aware of the risks, including increased competition and changing consumer preferences, and consider strategies to manage these risks.
What are the key factors to consider when evaluating Under Armour as an investment opportunity?
When evaluating Under Armour as an investment opportunity, there are several key factors to consider. First, it’s essential to analyze the company’s financial performance, including its revenue growth, profit margins, and cash flow. Additionally, investors should assess the company’s competitive position within the athletic apparel market, including its brand recognition, product offerings, and distribution channels. It’s also crucial to consider the company’s management team, its strategic vision, and its ability to adapt to changing market trends.
Furthermore, investors should also consider the company’s valuation, including its price-to-earnings ratio, price-to-sales ratio, and dividend yield. It’s also essential to evaluate the company’s debt levels, its interest coverage ratio, and its ability to generate cash flow to service its debt. By considering these factors, investors can gain a comprehensive understanding of Under Armour’s investment potential and make informed decisions.
How has Under Armour’s financial performance been in recent years?
Under Armour’s financial performance has been mixed in recent years. On the one hand, the company has reported revenue growth, driven by the success of its footwear and international businesses. However, the company has also faced challenges, including declining sales in its North American apparel business and increased competition from rival brands. As a result, the company’s profit margins have been under pressure, and its earnings per share have been volatile.
Despite these challenges, Under Armour has taken steps to improve its financial performance, including implementing cost-cutting measures, investing in digital marketing, and expanding its product offerings. The company has also made significant investments in its e-commerce platform, which has helped to drive online sales growth. Overall, while Under Armour’s financial performance has been uneven, the company has made progress in recent years, and its financial outlook appears to be improving.
What are the competitive advantages of Under Armour?
Under Armour has several competitive advantages that have helped the company to succeed in the athletic apparel market. First, the company has a strong brand reputation, built on its high-quality products, innovative designs, and successful marketing campaigns. Additionally, Under Armour has a diverse product portfolio, including footwear, apparel, and accessories, which allows the company to appeal to a wide range of consumers. The company also has a strong distribution network, with products sold in over 120 countries worldwide.
Furthermore, Under Armour has a strong commitment to innovation, with a focus on developing new products and technologies that meet the evolving needs of athletes and fitness enthusiasts. The company has also made significant investments in digital marketing, which has helped to drive brand awareness and engagement. Overall, Under Armour’s competitive advantages have helped the company to establish a strong position in the athletic apparel market, and to compete effectively against rival brands.
What are the risks associated with investing in Under Armour?
There are several risks associated with investing in Under Armour. First, the company operates in a highly competitive market, with intense competition from rival brands such as Nike and Adidas. Additionally, the company is exposed to risks associated with global trade, including tariffs, currency fluctuations, and supply chain disruptions. The company is also vulnerable to changes in consumer preferences, including shifts towards sustainable and eco-friendly products.
Furthermore, Under Armour has a significant amount of debt on its balance sheet, which could become a challenge if the company’s financial performance deteriorates. The company is also exposed to risks associated with its international operations, including regulatory risks, currency risks, and logistical challenges. Overall, while Under Armour has a strong brand and a solid financial position, there are risks associated with investing in the company that investors should carefully consider.
How does Under Armour’s valuation compare to its peers?
Under Armour’s valuation is generally in line with its peers in the athletic apparel industry. The company’s price-to-earnings ratio is slightly lower than that of Nike, but higher than that of Adidas. Additionally, the company’s price-to-sales ratio is slightly lower than that of its peers, reflecting the company’s lower revenue growth rates in recent years. However, the company’s dividend yield is higher than that of its peers, reflecting the company’s commitment to returning cash to shareholders.
Furthermore, Under Armour’s valuation is also influenced by its growth prospects, including its opportunities for expansion in international markets and its potential for growth in the footwear and accessories businesses. Overall, while Under Armour’s valuation is generally in line with its peers, the company’s growth prospects and dividend yield make it an attractive investment opportunity for investors seeking exposure to the athletic apparel industry.
What is Under Armour’s growth strategy?
Under Armour’s growth strategy is focused on several key areas, including international expansion, footwear growth, and digital transformation. The company is investing heavily in its international operations, with a focus on expanding its presence in key markets such as China, Europe, and Latin America. Additionally, the company is focused on growing its footwear business, with a focus on developing new products and technologies that meet the evolving needs of athletes and fitness enthusiasts.
Furthermore, Under Armour is also investing in digital transformation, with a focus on developing its e-commerce platform and improving its digital marketing capabilities. The company is also focused on developing new products and technologies that meet the evolving needs of athletes and fitness enthusiasts, including sustainable and eco-friendly products. Overall, Under Armour’s growth strategy is focused on driving growth through innovation, international expansion, and digital transformation.