Company Review Thursday · Under Armour

Company Review Thursday: Under Armour Inc.

Having signed the likes of Misty Copeland, Tom Brady, Stephen Curry, Cam Newton, Natasha Hastings and Eddie Lacy, it seems like Under Armour definitely has a long list of champions and greats on its team roster. Providing high end athletic gear is the core of Under Armour’s business and they do pretty good job of delivering quality gear to both their athletes and their customers. But as with all textile/apparel companies, they are at the mercy of keeping up with customer trends and preferences, a test that few in the industry regularly pass over time. In a sector where they compete with Nike, Lululemon and Addidas, is Under Armour in a position to drive customer spending in the athletic apparel sector in the upcoming years? I hope so. I bought it in hopes that it would.

Company Snapshot (Yahoo! Finance Data)
Name:  Under Armour Inc.(as of close of business 12/2/2015)
Ticker: UA
Current Price: $87.25
52 Week High Price:$105.89
52 Week Low Price: $63.77
Market Capitalization: $18.8B (Large Capital)
Price/Earnings (P/E Ratio): 90.04
Earnings/Share (EPS): $0.9654
Dividend: No Dividend Paid
Industry: Textiles, Apparel and Luxury Goods
Primary Business: Athletic Apparel Sales

The Good
With a catch phrase “We must protect this house” Under Armour was started in Kevin Plank’s grandmothers garage in 1996. He was a former football player looking to design clothes that would provide an alternative to the cotton tshirts worn that absorbed and carried sweat. The goal was to design gear that kept athletes light, cool, warm, dry and capable of performing at their best at all times. The company has not strayed from that goal.
And by the sales that the company generates each year, its obvious people are enjoying the products. Over the last 5 years revenue has almost tripled from $1.06 billion in 2010 to $3.08 billion in 2014 (~189% growth). And with a price/earnings ratio of about $90.04 it seems that there is plenty of upside for UA to establish itself in a similar way Nike did early on in its public offering.

The Bad
Plain and simple…Under Armour doesn’t pay a dividend. I don’t get free money.

The Ugly
Think of it like comparing LeBron James with Stephen Curry. Ironically, Nike and UA are their respective sponsors. Nike is the established “King” of the industry and Under Armour stays “Cookin’ up” new things that shake the industry up on regular basis. That type of competition is wonderful for the consumer, but both companies have to literally put their all out on the table to be able to keep their consumer base and nab a few from the other side. Nike is in the position that they can provide a steady dividend for their investors because they have significantly more cash to pull from to operate. Nike has an advantage in the market with investors looking for stability and establishment in companies they invest in especially after recent market volitility. Under Armour on the other hand is still somewhat the new kid on the block. It’s growing fast and the company is climbing the maturity curve. In the next few years, investors are looking to see some of Under Armour products maintain their traction with consumers.

Do you think there will be another LBJ vs The Chef finals? Nike and UA probably hope so. Last year was the year of The Chef and Under Armour has benefited. This year seems to be following suit especially now that the only undefeated NFL team has an Under Armour Sponsored QB dabbin’ on the world and the reigning NFL champions are lead by a Under Armour sponsored QB too. With the Panthers and Patriots being favorites to have a showdown in February, Under Armour is sure to win in 2016.

And so am I 🙂

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