Valuations: UAA Is the Most Expensive despite Being the Weakest
A look at UAA’s stock market performance
With a 30% decline in stock price, Under Armour (UAA) stood among the worst performers on the S&P 500 Index (SPY) in 2016. Unfortunately, 2017 has been no different. The company is down 32% YTD and has underperformed all major competitors and the broader apparel and accessories index.
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The seven-company S&P 500 Apparel and Accessories Index, of which Under Armour is a component, is in the green and has risen 5.8% YTD. In comparison, the S&P 500 Index (SPX) has jumped close to 10% to date.
Under Armour’s weaker-than-expected financial performance, guidance revisions, and analyst downgrades, which we’ll discuss in the next part, have erased 50% of its stock value over the last one and a half years.
However, the company continues to be the most expensive sportswear stock. It trades at a one-year-forward price-to-earnings ratio (or PE) of 46x. In comparison, Nike, LULU, and COLM are trading at 24x, 26x, and 20x, respectively.
Looking at the near-term earnings potential, UAA is clearly the weakest among its peers. Its earnings per share (or EPS) are expected to fall 22% over the next 12 months (or NTM). Nike’s NTM EPS is also likely to fall 3.4%. Analysts predict LULU and COLM to see a 9% and 2% rise in NTM EPS.
ETF investors seeking to add exposure to UAA can consider the iShares U.S. Consumer Goods ETF (IYK), which invests 0.2% of its portfolio in the company.