Under Armour, a well-known American sports apparel and footwear company, has been a significant player in the athletic wear market for over two decades. Founded in 1996 by Kevin Plank, the company has grown from a small startup to a global brand with a presence in over 120 countries. However, like any other publicly traded company, Under Armour’s stock performance has experienced its fair share of ups and downs, leaving investors wondering whether it’s a good time to invest in the company.
Under Armour’s Business Overview
Before we dive into the investment analysis, it’s essential to understand Under Armour’s business model and its position in the market. The company operates in three main segments:
Apparel
Under Armour’s apparel segment is the largest contributor to its revenue, accounting for approximately 70% of its total sales. The company offers a wide range of apparel products, including tops, bottoms, outerwear, and accessories for men, women, and youth. Under Armour’s apparel products are designed for various sports and activities, such as running, training, basketball, and golf.
Footwear
Under Armour’s footwear segment is the second-largest contributor to its revenue, accounting for around 20% of its total sales. The company offers a variety of footwear products, including running shoes, training shoes, basketball shoes, and sandals. Under Armour has partnered with several high-profile athletes, including Stephen Curry and Tom Brady, to promote its footwear products.
Accessories
Under Armour’s accessories segment is the smallest contributor to its revenue, accounting for around 10% of its total sales. The company offers a range of accessories, including hats, bags, and gloves.
Investment Analysis
Now that we have a better understanding of Under Armour’s business model, let’s analyze the company’s investment potential.
Financial Performance
Under Armour’s financial performance has been inconsistent in recent years. The company’s revenue has grown at a compound annual growth rate (CAGR) of 5% over the past five years, but its net income has declined at a CAGR of 15% over the same period. Under Armour’s operating margin has also declined from 11.4% in 2015 to 4.2% in 2020.
| Year | Revenue (in billions) | Net Income (in millions) | Operating Margin (%) |
|---|---|---|---|
| 2015 | 3.96 | 232 | 11.4 |
| 2016 | 4.83 | 256 | 10.3 |
| 2017 | 5.27 | 157 | 6.3 |
| 2018 | 5.27 | 122 | 4.6 |
| 2019 | 5.27 | 92 | 3.5 |
| 2020 | 4.45 | 55 | 4.2 |
Valuation
Under Armour’s valuation is a critical factor to consider when evaluating its investment potential. The company’s price-to-earnings (P/E) ratio is currently around 25, which is lower than its five-year average of 30. However, Under Armour’s P/E ratio is still higher than that of its peers, including Nike and Adidas.
Growth Prospects
Under Armour’s growth prospects are a significant factor to consider when evaluating its investment potential. The company has several growth initiatives in place, including its digital transformation, international expansion, and product innovation. Under Armour has also partnered with several high-profile athletes and celebrities to promote its brand and products.
Risks and Challenges
While Under Armour has several growth initiatives in place, the company also faces several risks and challenges that could impact its investment potential.
Intense Competition
The athletic wear market is highly competitive, with several established players, including Nike, Adidas, and Lululemon. Under Armour faces intense competition in terms of pricing, product innovation, and marketing.
Declining Sales in North America
Under Armour’s sales in North America have declined in recent years, which has impacted the company’s overall revenue growth. The company faces significant competition in the North American market, and its sales have been impacted by changing consumer preferences and trends.
Global Economic Uncertainty
The global economy is currently facing significant uncertainty, which could impact Under Armour’s sales and revenue growth. The company operates in several countries, and its sales could be impacted by changes in consumer spending patterns, currency fluctuations, and trade policies.
Conclusion
In conclusion, Under Armour is a well-established player in the athletic wear market, but its investment potential is impacted by several factors, including its financial performance, valuation, growth prospects, and risks and challenges. While the company has several growth initiatives in place, it faces intense competition, declining sales in North America, and global economic uncertainty.
Should you invest in Under Armour? The answer depends on your investment goals, risk tolerance, and time horizon. If you’re a long-term investor looking for a company with a strong brand and growth prospects, Under Armour may be a good investment opportunity. However, if you’re a short-term investor looking for a company with a strong financial performance and low valuation, you may want to consider other options.
Ultimately, it’s essential to conduct your own research, evaluate your investment goals and risk tolerance, and consult with a financial advisor before making any investment decisions.
What is Under Armour and what does it do?
Under Armour is an American sports apparel and footwear company that designs, develops, and sells athletic footwear, apparel, and accessories. The company was founded in 1996 by Kevin Plank and is headquartered in Baltimore, Maryland. Under Armour is known for its high-performance products that are designed to help athletes perform better and feel more comfortable during their activities.
Under Armour’s product line includes a wide range of categories such as running, training, basketball, football, and golf, among others. The company also offers a variety of accessories such as hats, bags, and gloves. Under Armour’s products are sold through various channels including its own website, retail stores, and through partnerships with other retailers.
What are the benefits of investing in Under Armour?
Investing in Under Armour can provide several benefits to investors. One of the main benefits is the company’s strong brand recognition and reputation for producing high-quality products. Under Armour has a loyal customer base and is known for its innovative products that meet the needs of athletes. Additionally, the company has a strong presence in the global market, with a significant share of the sports apparel and footwear market.
Another benefit of investing in Under Armour is its potential for growth. The company has been expanding its product line and entering new markets, which provides opportunities for increased revenue and profitability. Under Armour has also been investing in digital marketing and e-commerce, which can help to drive sales and improve customer engagement.
What are the risks of investing in Under Armour?
Investing in Under Armour also comes with some risks. One of the main risks is the intense competition in the sports apparel and footwear market. Under Armour competes with other well-established brands such as Nike and Adidas, which can make it challenging to gain market share. Additionally, the company’s reliance on a few key products and markets can make it vulnerable to changes in consumer preferences and market trends.
Another risk of investing in Under Armour is the company’s debt levels. Under Armour has a significant amount of debt, which can make it challenging to invest in new products and markets. The company’s debt levels can also make it vulnerable to changes in interest rates and economic conditions.
How has Under Armour performed financially in recent years?
Under Armour’s financial performance has been mixed in recent years. The company has reported revenue growth, but its profitability has been impacted by increased competition and higher costs. In 2020, Under Armour reported revenue of $5.3 billion, which was a 15% decline from the previous year. The company’s net income was $92 million, which was a 55% decline from the previous year.
Despite the challenges, Under Armour has been taking steps to improve its financial performance. The company has been investing in digital marketing and e-commerce, which has helped to drive sales and improve customer engagement. Under Armour has also been focusing on its core products and markets, which has helped to improve profitability.
What is Under Armour’s growth strategy?
Under Armour’s growth strategy is focused on several key areas. One of the main areas is digital marketing and e-commerce. The company has been investing in digital marketing and e-commerce, which has helped to drive sales and improve customer engagement. Under Armour has also been focusing on its core products and markets, which has helped to improve profitability.
Another key area of focus for Under Armour is innovation. The company has been investing in research and development, which has helped to drive innovation and improve product quality. Under Armour has also been partnering with other companies and organizations to drive innovation and improve its products.
Is Under Armour a good investment for long-term investors?
Under Armour can be a good investment for long-term investors who are looking for a company with a strong brand and a proven track record of innovation. The company has a loyal customer base and is known for its high-quality products. Under Armour has also been investing in digital marketing and e-commerce, which can help to drive sales and improve customer engagement.
However, long-term investors should be aware of the risks associated with investing in Under Armour. The company faces intense competition in the sports apparel and footwear market, and its debt levels can make it vulnerable to changes in interest rates and economic conditions. Long-term investors should carefully consider these risks and do their own research before making an investment decision.
How can I invest in Under Armour?
Investing in Under Armour is relatively straightforward. The company’s stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol UAA. Investors can buy and sell Under Armour stock through a brokerage firm or online trading platform. Investors can also invest in Under Armour through a mutual fund or exchange-traded fund (ETF) that holds the company’s stock.
Before investing in Under Armour, investors should do their own research and consider their own financial goals and risk tolerance. It’s also a good idea to consult with a financial advisor or broker to get personalized advice and guidance.