Under Armour Inc (UA): “I Will,” or Maybe I Won’t

Page 1 of 2

Under Armour Inc (NYSE:UA)I have a difficult time not buying stock in companies when I buy their products on a regular basis. One such company is Under Armour Inc (NYSE:UA). My personal experience with Under Armour clothing and shoes is that they are very high quality and very comfortable. In fact, since my wife and I tried Under Armour shoes, we have recommended them to almost everyone we know. However, recommending Under Armour Inc (NYSE:UA) stock is a little more difficult.

This Is a Great Company That Could Do so Much Better
Don’t get me wrong–I’ve owned Under Armour stock in the past, and been very pleased with the results. However, once the stock gotten past a certain valuation, I could no longer justify continuing to own the shares at such lofty prices. There are several issues facing Under Armour Inc (NYSE:UA), and in an industry with competition such as Lululemon Athletica inc. (NASDAQ:LULU) and NIKE, Inc. (NYSE:NKE), the company can’t afford to be second best at anything.

When a company reports revenue growth of 23%, and this is evenly spread across each of their divisions, you would expect good earnings growth as well. However, due to promotional spending and incentives, Under Armour saw a 50% decline in diluted EPS. For a stock selling at a forward P/E ratio of 40.51, a decline in earnings like this should be a red flag.

Consistency in Revenue and Earnings Growth
The first thing investors need to keep an eye on is Under Armour Inc (NYSE:UA)’s earnings growth rate. Currently, analysts expect the company to grow earnings by just less than 21% in the next few years. In past quarters, the company exceeded 20% earnings growth. However, looking at the 50% decline last quarter, investors need to see if the company can get back on track.

When you look at Under Armour’s peer group, Lululemon Athletica inc. (NASDAQ:LULU) is expected to grow earnings faster than Under Armour at 22.24%, versus 20.83%. NIKE, Inc. (NYSE:NKE) isn’t expected to grow as fast as these two companies at about 10% EPS growth, but Nike is also a much larger company as well.

It’s acceptable for the company to show a large decline for one quarter based on certain expenses, but if this becomes a trend, Under Armour Inc (NYSE:UA) would be in serious trouble.

A second item to watch is continued momentum in revenue growth. Analysts are generally expecting an over 22% increase in revenues this year from the company, and anything less would be a major blow to investor’s confidence. In fact, Under Armour is expected to grow revenue faster than Lululemon, from which analysts expect 21% revenue growth. In contrast, NIKE, Inc. (NYSE:NKE) is only expected to grow revenue by 4.9%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!