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 - nathan.clayberg@drake.edu

Chris Kaminski - christopher.kaminski@drake.edu

Zach DeLeon - zachary.deleon@drake.edu

Jacob Bacon - jacob.bacon@drake.edu