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Operating Loss Could Be in the Cards for Under Armour in 2Q17

PART:
1 2 3 4 5
Part 4
Operating Loss Could Be in the Cards for Under Armour in 2Q17 PART 4 OF 5

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.

In comparison, Nike (NKE) and Skechers (SKX) have risen 14.8% and 16.6%, respectively, to date. Columbia Sportswear (COLM) and Lululemon Athletica (LULU) have tumbled 0.8% and 5.4%, respectively.

Valuations: UAA Is the Most Expensive despite Being the Weakest

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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.

Discussing valuations

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.

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