Under Armour Inc (UA), NIKE, Inc. (NKE), Dicks Sporting Goods Inc (DKS): After a Blowout Quarter, This Apparel Company Is Still a Buy

Where could it go?

Although the two segments of Under Armour’s business mentioned above are still in their infancy, there are even more areas of potential for Under Armour to grow. First is in its women’s lines, which currently make up less than 30% of the company’s sales. Second, and even more significant, is the $58 billion “active wear” market, which includes any athletic-inspired clothing not necessarily meant for use in training (think a t-shirt with Nike’s logo for everyday wear). Under Armour has barely tapped into this market, and there is a wide range of possibilities for the company to explore.

Speaking of the athletic apparel markets, a good way to monitor general trends in the company’s end markets is to add one of the sporting goods retailers, like Dicks Sporting Goods Inc (NYSE:DKS) to your radar. Dicks Sporting Goods Inc (NYSE:DKS) gets a large portion of its revenues from apparel and footwear, and both Under Armour and NIKE, Inc. (NYSE:NKE) are among the top sellers, with NIKE, Inc. (NYSE:NKE) merchandise accounting for about 17% of Dicks Sporting Goods Inc (NYSE:DKS) total sales. On the other hand, when Under Armour and NIKE, Inc. (NYSE:NKE) do well, it can be a good indicator of health in stores like Dicks Sporting Goods Inc (NYSE:DKS). These premium products generally carry larger price tags and mean more profits to retailers’ bottom-lines.

Final words

Despite the excellent quarter, Under Armour is still a relatively small company, with a market cap of around $7.3 billion (Nike’s is over $55 billion). If Under Armour keeps growing its footwear sales, and gets a little creative with their apparel lines, there is no reason why Under Armour can’t close the gap with Nike over the next decade or so. While it is completely reasonable to sell a portion of an existing position after a gain like this, there is no reason why the higher share price should keep you from making a new investment in this young and ambitious company.

The article After a Blowout Quarter, This Apparel Company Is Still a Buy originally appeared on Fool.com.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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