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Under Armour, Inc. (UA) Trade Card™

Under Armour, Inc. (UA)
14.01 0 (0.00%)
Sector: Consumer Durables and Apparel
Published by Capital Market Laboratories on 2018-04-20

What does this rating mean?
3Mo: +9.0%   |   6Mo: -11.9%  |   12Mo: -22.6%

10DMA: $14.4  |  50DMA: $14.6  |  200DMA: $14.6
What does this rating mean?


➜ UA generates $0.9736 in revenue for every $1 in expense, which is poor and considerably below the sector average of $1.06.

➜ UA generates $315,000 in revenue per employee which is below the sector average of $1.1 million.

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The bullish thesis for UA is simple: It's growing faster than peers. It's executing better than peers. It has a vision clearer than its peers and it has a stock price that has risen higher than its peers by huge amounts over the last two-years. Period.

While the stock market has been in correction mode, UA stock is up 19% in the last three-months and 52% in the last year.

Under Armour has stepped boldly into the sports apparel and sports celebrity endorsement segment going head to with industry giant Nike. UA CEO Kevin Plank has named a goal of building a $1 billion brand (from a $100 million basketball brand) around Golden State Warriors star (and NBA MVP) Stephen Curry with a focus on the Curry One (and Two) signature basketball shoe. With the Warriors and Stephen Curry winning the NBA championship, Plank's bet is looking pretty sweet.

Here's a chart of UA's revenue and net income through time. Note that revenue is at all-time highs, and net earnings (net income) are just off all-time highs.

UA has also dipped into Lululemon Athletica's business of "Wunder Unders." You can read our full write up on LULU here: How Lululemon Disrupted Everything But Now Faces Trouble. UA has found that high margins (i.e. premium prices) with a solid brand name can do wonders (no pun intended) for it as well. Hat tip to LULU for inventing the market and hat tip to both Nike and UA for imitating to compete.

But the real business model right now is simply: Beat Nike. In order for that to happen, UA is going to have to go after the basketball shoe market, and it is. CNN Money writes:

"Under Armour champs: Basketball superstar Stephen Curry wore Under Armour on his way to winning the NBA championship and becoming the most valuable player in the league. Young golfer Jordan Spieth surprised many by winning the Masters Tournament this year and followed that up by besting everyone at the U.S. Open. He, too, was sporting Under Armour attire." (Source: CNN Money).

That same source tells us that Nike currently owns about 90% of the basketball show market, but of course, the Curry One is the new face of the segment now that its namesake was named league MVP and become the NBA world champion with the Warriors. There is momentum for UA in this segment, it's tangible.

One last piece of the puzzle for UA is its foray into the Internet of Things for sports apparel. Under Armour claims it is adding a massive 100,000 new users a day to its Connected Fitness community platform. That's on top of the 140 million users already there. That makes the firm's social presence about 40% as large as Twitter.

The bearish argument surrounds some reasonable scepticism that this "social" piece will drive little return on investment and a fair question as to "where this is all going?". The bullish thesis, supported by UA's CEO Kevin Plank surrounds the idea that everything will eventually led to brand awareness, loyalty and eventually sales. The CNN Money article writes, "The signature piece of this vision is a gear tracker that allows people to track the performance of their shoes or other Under Armour pieces as they are working out."

The Elephant in the Room
UA announced a stock split which seems totally innocuous at first blush, but it is not innocuous. As InvestorPlace puts it so well:

"A stock split is tantamount to exchanging a $20 bill for two $10 bills — the owner of said cash still effectively holds the same value. Owners of UA won’t be getting two lower-priced shares of the same UA they own right now, though. Their current shares include voting rights, which allows them to pick who they want to be on the board of directors []. The {new} shares they'll be receiving as part of the Under Armour stock split are non-voting shares, meaning they’ll have less of a say if and when the time comes to select new board members.

If it seems like an underhanded move ultimately designed chip away at shareholder power, that’s because it is." (Source: Is the Under Armour Stock Split a Raw Deal for UA Owners?

For now, UA is a growing company that hasn't had a "miss" in a long time. There is tangible momentum in the business and the stock market reflects that rather abruptly.

UA has seen revenue (TTM) rise over both one- and two-years by 3.1% and 25.6%, respectively. Revenue in the most recent trailing-twelve-months is $4.98 billion. Last year UA reported $4.83 billion and two-years ago annual revenue was $3.96 billion.

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Technicals   |   Support: 11.95   |   Resistance: 14.99   

Swing Death Cross Alert: The short-term 10 day MA is now below the 50 day MA.

UA has a one bull (lowest rated) technical rating because it's trading below the 10-day (short-term), 50-day (medium-term) and 200-day (long-term) moving averages.

Earnings Estimates
Earnings Date
Revenue (Mean)
Revenue (Median)
Last Quarter (Actual)
$1.37 billion

Fundamentals Rating Summary

Metric Current 1yr Ago 2yr Ago Direction
Revenue (TTM US$ Millions)Rising 4,977 4,825 3,963 Rising

Operating Margin (QTR)Falling 0.97 1.14 1.18 Falling

Net Income (TTM US$ Millions)Trending Lower -48 257 233 Trending Lower

Cash from Operations (TTM US$ Millions)Falling 234 364 15 Falling

Capital Expenditures (TTM US$ Millions)Trending Lower 283 317 301 Trending Lower

Stock Returns and Chart

UA is up +9.0% over the last three months and down -11.9% over the last six months. The stock has returned -22.6% over the last year.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with regression channel and 10-day momentum (on the bottom).

Note: You can change time horizons by clicking the or buttons near the bottom of the chart. You can examine a one minute day trading chart by clicking the at the top left corner of the chart.

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Now let's examine the visualizations of the critical financial measures.

Enter Symbol

Revenue (TTM US$ Millions) 4,9774,8253,963Rising

Revenue over the trailing twelve months (TTM) for UA is rising. For the most recent (annual) period the company reported $4.98 billion from $4.83 billion a year ago, or a 3.1% change. Two years ago revenue (TTM) was $3.96 billion which is a change of $1.01 billion a (25.6% move).

What do all these numbers mean?
UA's fundamental rating benefited these results:
1. The one-year change was positive (but no extra points were given for a large percentage increase).
2. The two-year change was positive.

Let's look at Revenue (TTM US$ Millions) in the chart below.

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Enter Symbol

Operating Revenues/Operating Expense 0.971.141.18Falling

Operating Revenues/Operating Expense
This ratio (which simply represents how much revenue is generated per one dollar of expense) must be at a minimum above 1.0 in order for a company to turn an operating profit. For the latest quarter UA showed a ratio of 0.97.

What do all these numbers mean?
One year ago Operating Revenues/Operating Expense was 1.14. In the last year we can see operating margins are decreasing and less than 1.0 for the most recent quarter (below the critical level).

UA's fundamental rating was affected from the operating margin numbers in the following ways:
1. The current value is below the critical 1.0 level (the firm generates an operating loss).
2. The one-year change was negative (lowers the rating).

Let's look at Operating Revenues/Operating Expense in the chart below with the total assets in the orange line.

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Revenue per Employee

Before we turn to earnings and cash flow analysis, let's look at a different view of revenue on a scatter plot with peers for some perspective.

On the x-axis we equal space the companies and on the y-axis we plot revenue per employee (TTM) in $millions. For this chart, the upper right hand corner is "best" and the lower left hand corner is "worst." The company with the top revenue per employee is marked in green.

UA 's value is $315,000 million per employee (find it on the y-axis).

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Net Income (TTM US$ Millions) -48257233Trending Lower

Net Income (after tax profit) over the trailing twelve months (TTM) for UA is falling. For the most recent trailing-twelve-months (TTM) the company reported net income of $-48 (million).

Net Income (TTM) (aka annual earnings) is trending lower meaning that annual earnings have decreased for at least five consecutive quarters.

In our next chart we plot Net Income (TTM US$ Millions) in the blue bars and the quarterly results in the gold line. Note the falling bars from a year ago (four quarters ago).

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Cash from Operations (TTM US$ Millions) 23436415Falling

Cash from Operations (TTM US$ Millions) is a critical determinant of stock price since market cap is the present value of all future free cash flows. For UA the metric is falling (it was $364 million last year). For the most recent trailing-twelve-months the company reported Cash from Operations (TTM US$ Millions) of $234 million. That's a drop in the most recent trailing-twelve-months from $364 million or a -35.76% decrease.

This measure of cash is up $220 million from 15 two-years ago.

For our next chart we plot Cash from Operations (TTM US$ Millions) in the blue bars through time. Note the falling bars from a year ago (four quarters ago).

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Capital Expenditures (TTM US$ Millions) 283317301Trending Lower

Capital Expenditures (TTM US$ Millions) is trending lower meaning that for at least five consecutive quarters, it's been dropping. Several consecutive drops in capital expenditures may be a red flag for a trend of under investment in the future. Note the trend in the chart below.

Capital Expenditures (TTM US$ Millions) in the most recent quarter for UA was $283 million. CapEx is falling (-10.82%) from last year's value of $317 million. Further, we can see that CapEx today relative to two-years ago is decreasing (-6.13%) from last year's value of $301 million.

In our final time series chart we plot Capital Expenditures (TTM US$ Millions) in the blue bars. Note the falling bars from one-year ago.

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