Under Armor: Buy or Bust?

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As a college student, the latest trends in clothing and fashion often include many different kinds of athletic wear.  As a young person, no brand is more fitting for the youthful culture and the Brand meaning than Under Armor (UA).  They have a unique focus on performance and everyday usability, and this company is part of a new generation of players looking to take on the established brands of Nike and others.


Under Armor stock has been on a wild ride over the past few years, going from highs of around $125 per share all the way down to the current price of  $19 per share.  This dramatic movement is also surprising as the company has been growing and reporting positive sales numbers.  Last year, while the market was up and strong most of the year, UA was down over 55%.  Investors seem to hate the stock and the company is in a rough position with respect to its valuation.  Seeking Alpha has many articles on the value of UA shares and why they really do seem like an overweight company in the marketplace.  The guidance has slowed for the company in the past few quarters, and the thinking among analysts is that UA has reached its max growth  potential and is starting to cool down and transition into a more stable and slower moving company.  With a Price to Earning Ratio of 44 at its current stock price, the earnings have significantly slowed and this has affected the underlying value of the stock in the eyes of investors.


In addition to generally softer earnings, the international growth that the company is aiming for has taken longer than expected to take root and start contributing to the bottom line.  Even at the new lower price since the dramatic drop off in 2016, UA is still struggling to grow the bottom line at a rate which makes investors happy with the brand, and the direction of the company is becoming more unclear every day as the marketplace changes to a digital world more and more.  UA has been a little slow developing digital elements to connect with the clients it targets, and competition in the sports world has been fierce with various sports stars working with the brand to try and increase growth.  Cam Newton and Stef Curry are UA sponsored, but the brand is still struggling to get the needed sales growth.  Based on this lack of continual growth and instability with the company earnings, Under Armor is a stock that I would avoid as an investor as there is too much downside risk to owning shares.

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