UA Market Research & Analysis Report
Updated Feb 9, 2015

Growth and Balance Sheet

The company reported net income of $88 million, or 40 cents diluted earnings per share, for the fourth quarter of 2014 ending December 31. That's up from net income of $64 million, or 30 cents diluted earnings per share for the same quarter last year. EPS for the year 2014 were 95 cents, up from 75 cents for last year. Revenues for the fourth quarter were $895 million, up from $683 million for the same quarter last year. Fourth quarter apparel net revenue were up 30% year-on-year to $708 million, primarily due to new offerings across training, hunting, and studio. Footwear net revenue were up 55% to $86 million, primarily due to expended offerings in running and basketball. Accessories net revenue was up 22% to $79 million. Company’s gross margin decreased 156 basis points to 49.83% of sales from 51.39% in the fourth quarter of 2013, primarily due to higher mix of international revenues. The operating margin improved to 16.31% of sales from 14.35% for the fourth quarter of last year. Net cash provided by operating activities for the year ending December 31, 2014 was $219 million, in comparison to $120 million for last year. Cash and cash equivalents as of December 31, 2014 were $593 million, in comparison to $347 million as of December 31, 2013. UA forecasted first quarter of 2015 EPS are expected to be from 3 cents to 16 cents, compared to actual EPS of 6 cents for the first quarter of last year. The financial strength indicators of the company are at satisfactory levels. Company’s current ratio is 3.67 and the industry average ratio is 1.99. The quick ratio of 2.40 is also much better than the industry average of 1.17. The interest coverage ratio of 90.38 is at much healthier levels than the industry average of 33.45. In terms of efficiency and effectiveness, the asset turnover ratio of 1.68 is better than the industry average of 1.04; the inventory turnover ratio of 3.13 is better than the industry average of 2.03; and the ROE of 17.31% is at better levels than the industry average of 15.2%. 

Valuation

UA PE stands at 78.01 above the industry average of 19.75, and above the stock market average represented by the S&P 500 average of 20.03. The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 39.14x to 71.60x trailing 12-month earnings. UA's current Price/Sales of 5.08 is above the average of its industry of 1.17. UA’s head to head comparison to its main competitors shows that the company has the highest gross margin, and one that is above the industry average. The achieved operating margin of the company is the second highest result out of the selected competitors, and it is more than double the industry average. The quarterly revenue growth of the company is the best results in comparison to competitors’ achieved growth for the quarter, and it is above the industry average. The company trades at much higher P/E ratio than the selected peers. Also the P/S ratio of the company is considerably higher in comparison to the selected peers. UA’s twelve trailing months EBITDA is $426.05 million, higher only than COLM’s EBITDA, and above the industry average of $53.59 million. The stock is currently trading below its intrinsic value of $88.46, this suggests that the stock is currently undervalued at these levels. The beta of 0.89 implies lower volatility of the stock with respect to the S&P 500. UA has shown very favorable earnings consistency over the last five years. Company’s earnings have increased by 32.65% over the same period. The current quarter earnings in comparison to the same quarter last year have increased by 33.33%. UA Total Debt to Equity ratio of 21.05 is above the required maximum, but it is below the industry average of 40.1. UA’s current price levels are below the maximum level, 3.17% below the 52 week high of $76.54, and the technical analysis give positive view of the stock. The majority of analyst ratings are hold. UA currently does not pay any dividends.

About UA

Under Armour, Inc. is engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth. The brand’s moisture-wicking fabrications are engineered in many designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. The Company’s primary business operates in four geographic segments: North America, comprising the United States and Canada; Europe, the Middle East and Africa (EMEA); Asia and Latin America. Each of these geographic segments operates predominantly in one industry: the design, development, marketing and distribution of performance apparel, footwear and accessories. Beginning December 2013, the Company also operates its acquired MapMyFitness business as a separate segment.

Competitor Comparison

Under Armour, Inc. (NYSE: UA) N.V.

Highlights

Under Armour, Inc., together with its subsidiaries, develops, markets, and distributes branded performance apparel, footwear, and accessories for men, women, and youth primarily in North America, Europe, the Middle East, Africa, Asia, and Latin America. The stock closed yesterday’s trading session at $74.11. In the past year, the stock has hit a 52-week low of $45.05 and 52-week high of $76.54. The intrinsic value of the stock is above the current price. UA has a market cap of $15.84 billion and is part of the Consumer Goods sector.

• Focus on innovation
• Broad product portfolio
• Strong financial performance

• Dependence on third party suppliers and manufactures

UA Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. UA's 52 week high is $76.54, current price is $74.11, is 3.17% below the 52 week high.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 78.01, the average industry P/E ratio is 19.75 and is above the S&P 500 P/E ratio of 20.03.

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders.  Insiders own 0.77% of UA stock. Management's representation is not large enough. This does not satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model.

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

UA is trading in the range of $63.77 - $76.54 in the past 30 days. The stock has been showing support around the level of $60 and resistance in the $75 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 66.96. After gapping up in July above the resistance around $60, the stock failed to go past $72 on two occasions. Finally, in the beginning of February the stock was able to close above this resistance level which is a strong bullish signal. The stock is currently trading at its all-time high and we believe that there is room for more growth in the near-term future. Our indicators give positive view of UA.

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com are 10 Buy, 7 Outperform, 17 Hold, and 1 Underperform.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. UA’s annual EPS for the last 5 years were 0.34, 0.46, 0.61, 0.75, and 0.95 this type of earnings action is very favorable.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. UA’s annual EPS for the last 5 years were 0.23, 0.34, 0.46, 0.61, and 0.75 this type of earnings action is very favorable.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. UA’s EPS growth for this quarter relative to the same quarter a year earlier is 33.33%, above our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. UA’s annual earnings growth rate over the past five years is 32.65%, above our target.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.