Under Armor Poised for Breakout

James | May 26, 2009 | Comments 5

Under Armor (UA)

Under Armor designs, manufactures, markets, and distributes performance apparel, footwear, and accessories, targeting athletes and sports enthusiasts.

What I Like

With UA share price currently at $20.70 its shows the company is on an uptrend when valued against the 200-Day Moving Average, which is $20.20. With a 52-Week High of $43.52 (Sep 08) and a 52-Week Low $11.94 (Mar 09) the stock has seen the share of volatility that the markets have experienced. I foresee UA rapidly expanding. I think UA is in its early growth stage in the highly competitive sports apparel market. Under Armors long-term appeal is their strong and growing brand, opportunities for new product adjacencies, and expanding distribution worldwide. Under Armor had yet to even break into the international market, which offers a plethora of new opportunities for this growing brand. They also are expanding across the United States with Under Armor Apparel Stores. They have cut back store expansion until 2010 though which was a smart, strategic move due to the weakness in the economy. Daily Volume is above 100,000, which is the threshold in which I set. They have solid numbers with a 12.59% return on equity and 11.89% return on assets. They have a high institutionally held rate of 70% and insider rate of 7% which bodes well for long-term growth as institutions will create buzz about the stock. Another plus is the company is not in debt and has cash on hand.

What I Don’t Like

The current global crisis is the only thing holding this company back yet when you factor in that many economists predict consumer spending to sizably increase in the second half of the year they should be fine. They are also in a highly-competitive industry competing against brands like Nike and Adidas which means they need to expand and take over a sizable amount of the market-share.

Overview

Overall Under Armor is a steal of a stock, I believe it is a steal all the way up to $23 and my 12-month forecast has the stock hovering around $32.

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