Under ArmourA Lifeboat Analysis
Jacob Bacon, Nathan Clayberg, Zach DeLeon, and Chris Kaminski
Overview
● Recommendation● Financial Statement Analysis● Qualitative Analysis● Valuation Methods● Future Outlook
Recommendation
● It is recommended that we buy $50 million in Under Armour Class A Common Stock.
Financial Statement AnalysisUnder Armour(2016)
Industry(2016)
Under Armour (2017)
Return on Equity 12.7% 19.3% -2.4%
Quick Ratio 1.528 2.296 1.112
SG&A as a Percentage of Sales
37.2% 33.9% 41.9%
Long Term Debt as a Percentage of Total Liabilities
49.0% 20.0% 38.4%
Net Income as a Percentage of Sales
5.3% 8.9% -1.0%
Reasons for recent Downfall
● Sports Authority and Sport Chalet going bankrupt● Discounted priced products flooding online sites● Dependency on North American market for success● High inventory levels in relation to product demand● High P/E ratio driving down stock price
SWOT Analysis● Strengths
○ Brand recognition○ Star-Studded Endorsements○ Company Infrastructure○ Fresh Management
Perspectives○ High quality products
● Opportunities○ Economy○ International expansion○ Specialized product lines○ Women’s market
● Weaknesses○ Athleisure○ Slower revenue growth in U.S.
market○ Supply Chain Inefficiencies○ Lower relative international
market share● Threats
○ Amazon and other online retailers○ Nike/Adidas’ international
presence○ LuluLemon and Columbia’s
athleisure market share
Recommended Strategies for Under Armour● Expand marketing efforts abroad, especially in China● Invest in footwear product development● Maintain current price levels for consumers● Increase marketing and promotional budget● Increase efficiency to decrease unneeded SG&A
Growth Drivers and Risks
Growth Drivers:
● Strong economic growth and Pro-business tax law changes
● Lower SG&A expenses● International Expansion
Opportunities● Consolidation of Product
Lines● Star-power of brand and
endorsements● Management
Risks:
● Restructuring of Debt● Cheaper products flooding
market● Inability to regain market
share● Risk of short term insolvency
Valuation
3 Yr. 5 Yr.
EV/EBITDA: $24.29 (40%) $29.20 (68%)
P/E Ratio: $22.69 (31%) $27.19 (57%)
DCF: $26.37 (52%)
EV/EBITDA Vs. Last Price
P/E ratio relative to competition
EPS
DCF
*Slightly decreasing SG&A
*Restructuring costs added in 2018
Future Outlook for Under Armour
● International growth (China and Europe)● Fewer product lines● Decrease in spending● Increase in women’s product lines
● 3 year price target: $26 (50% increase)
The Lifeboat Analysis
Questions?
Contact information:
Nathan Clayberg - [email protected]
Chris Kaminski - [email protected]
Zach DeLeon - [email protected]
Jacob Bacon - [email protected]
