Should You Be Bothered by Under Armour's Valuation

Under Armour’s (UA) growth story has been very impressive over the last few years and although there have been doubters at every stage, the stock has continued to move higher. With the market at all-time highs, investors are worried if Under Armour can justify its rich valuation by continuing its upwards growth trajectory.

Throughout the past few years, Under Armour has been growing consistently. Moreover, the company endures to execute operationally, as the company’s revenue surged more than 29 percent in the first half of 2016.

In the meantime, Under Armour is transforming into a worldwide brand.
International sales surged 70 percent in previous quarter as Under Armour established its existence in new markets comprising the Germany, U.K., and the Netherlands. At present, international sales accounts for 15 percent of the business, a surge of 12 percent and 9 percent compared to 2015 and 2014, respectively.

Although the figure looks small, stockholders should notice that it is growing at a healthy rate. As a matter of fact, Under Armour cannot be compared to its foremost rival Nike (NKE) as 53 percent of Nike’s sales come from outside of the United States.
Should You Be Bothered by Under Armour
Image by Wokandapix / Pixabay
Regardless, Under Armour has displayed a solid start.

On the other hand, as the brand’s footprint evolves in the U.S and sales growth here plateaus, it has plenty of prospective to speed up growth elsewhere. Most significantly, in China, basketball is a very popular game, and Stephen Curry has formerly made several tours of China for brand advertising. Therefore, it is highly likely that China will prove to be a long-term growth driver for Under Armour.

Apart from all this, Under Armour is also placing its attention on the running segment. The company’s Speedform line has supported it to gain momentum in the running market. Moreover, the Gemini 2 Record Equipped, which comprises of a chip that links the shoe with MapMyRun application, has helped the company gain a technological lead in the footwear segment as well.

As Under Armour carries on promoting itself by offering the most innovative and advanced performance gear, it requires running shoes that meet the sportsmen’s demand. And, the company Speedform line appears to be doing great job.


Going forward, Under Armour’s growth in the international market should keep the stock’s run going for the foreseeable future. Under Armour has established itself as a great brand and will continue growing under the leadership of the current management, who have done a commendable job till now. Thus, I think the stock is a buy irrespective of its valuation.
Published on Sep 6, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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