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Has the Market Priced Under Armour Stock Fairly?

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Comparing Under Armour’s growth and earnings to its peers

As we’ve already seen in this series, Under Armour has maintained a solid top-line growth in excess of 20.0% over the last 25 quarters. The company’s top line grew at a compound annual growth rate of 29.0% over the previous three years. That compares to revenue growth of 15.0%, 9.0%, and 12.0% for Lululemon Athletica (LULU), Nike (NKE), and Columbia Sportswear (COLM), respectively, over the same period.

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Looking forward, the company is poised to grow 24.0% in fiscal 2016 and 23.0% in each of the next two years. Earnings are forecast to rise 13.0% in fiscal 2016 and 15.0% and 16.0% in fiscal 2017 and fiscal 2018, respectively. That compares to a growth of 8.5% and 12.7% in fiscal 2017 and fiscal 2018, respectively, for Nike.

Comparing Under Armour’s valuations to its peers

That being said, Under Armour has been fully priced for growth. The company trades about 43 times its trailing 12-month earnings and 46 times its next 12-month earnings as of January 18, 2017.

UAA trades at a premium to all its sportswear peers. Nike, Lululemon, and Columbia Sportswear trade at one-year forward PE (price-to-earnings) ratios of 22.0x, 28.5x, and 19.6x, respectively.

In fact, UAA trades at a premium to most apparel stocks, including PVH (PVH), VF Corporation (VFC), and Gap (GPS).

However, comparing historically, Under Armour’s valuations have fallen. The company traded at an average PE ratio of 63.0x in 2014, 77.0x in 2015, and 61.0x in 2016.

If you want to invest in UAA and avoid the risk, you can consider the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 0.30% of its portfolio in the company.

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