Summary: OVERPRICED
Score: 7/20
MOS: 0%
Share Price: $16
Sticker Price: $0
Is Under Armour stock a good buy?
Under Armour is an American sports equipment and apparel company founded in 1996 and headquartered in Baltimore, MD.
Here is a fun story on the history of Under Armour…
Under Armour was founded on September 25, 1996 by Kevin Plank, a then 24-year-old former special teams captain of the University of Maryland football team. Plank initially began the business from his grandmother’s basement in Washington, D.C.
As a fullback at the University of Maryland, Plank got tired of having to change out of the sweat-soaked T-shirts worn under his jersey; however, he noticed that his compression shorts worn during practice stayed dry. This inspired him to make a T-shirt using moisture-wicking synthetic fabric. After graduating from the University of Maryland, Plank developed his first prototype of the shirt, which he gave to his Maryland teammates and friends who had gone on to play in the NFL. Plank soon perfected the design creating a new T-shirt built from microfibers that wicked moisture and kept athletes cool, dry, and light.
Under Armour received its first big break in 1999 when Warner Brothers contacted Under Armour to outfit two of its feature films, Oliver Stone’s Any Given Sunday and The Replacements. In Any Given Sunday, Willie Beamen (played by Jamie Foxx) wears an Under Armour jockstrap. Leveraging the release of Any Given Sunday, Plank purchased an ad in ESPN The Magazine. The ad generated close to $750,000 in sales.
Although the founders story is inspirational, the stock is not the best investment at the moment.
This first article from The Motley Fool mentions three stocks that are absurdly overpriced right now. The first one on the list happens to be Under Armour. The stock has tumbled 60% over the last five years.
This second article from The Motley Fool mentions some major red flags with the company including…
- Under Armour cannot keep up with Nike. Nike sells very similar products but is a much larger company with significantly more money to spend on marketing and advertising. In other words, Under Armour doesn’t have a Moat.
- In a Canaccord Genuity survey regarding athletic apparel brands in 2019, Nike ranked first in innovation, fashion, and purchase intent. Adidas ranked second in all three categories, while Under Armour ranked third.
- Under Armour’s founder Kevin Plank abruptly stepped down as the company’s CEO at the beginning of 2020. A few months later, the company disclosed an SEC probe into allegations that it inflated its revenue by dumping its inventories into off-price channels throughout 2015 and 2016. The probe has yet to be resolved.
It looks like Under Armour is facing an uphill battle. Trying to keep up with Nike and Adidas is a feat in itself but that SEC probe is an absolute nightmare for any company.
With a score of 7/20, the financials are too weak. With a MOS of 0% (Share Price of $16 vs a Sticker Price of $0) this stock could be stuck at its current price or fall even further.
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