Under Armour Will Shine in 2014

On the heels of a great 2013, popular athletic-apparel maker Under Armour appears ready to continue its winning streak in the new year.

Jan 6, 2014 at 3:17PM

In terms of growth, there may not be a better performing company in the retail segment than Under Armour (NYSE:UA). The maker of athletic apparel, footwear, and accessories has excelled on numerous fronts in recent years. However, the company's robust growth is derived directly from the immense strength of the Under Armour brand itself, which has proven more universally appealing than the brands of industry rivals like Lululemon Athletica (NASDAQ:LULU).

Brand strength
Social media can be an effective way to gauge brand popularity. In the case of Under Armour versus Lululemon, the comparison is especially valuable because the companies are approximately the same size; Under Armour's market capitalization is $9.2 billion and Lululemon's market capitalization is $8.5 billion.

Despite being roughly the same size, Under Armour has more than three times the amount of fans on Facebook that Lululemon has. The former has more than 2.7 million fans, while the latter has just and 891,000.

The results are somewhat expected, as Under Armour has a more diverse product lineup that appeals to a much broader audience. While the company's brand originally catered primarily to male athletes in sports like football, Under Armour management has made great strides in targeting female athletes as well as youth in recent years.

Under Armour has embarked on a campaign called "What's Beautiful," which has targeted female athletes through various print, television, and social-media advertisements over the last year. The strategy focused on consumer engagement and allowed fans to post their workout routines and progress online. The company has also introduced new female product lines and redesigned a number of stores with female shoppers in mind.

Currently, growth in Under Armour's female apparel is outpacing the company's overall growth and indicates that management's efforts have been very successful. Chief executive officer Kevin Plank is anticipating that Under Armour's female businesses will make up $1 billion in revenue by 2016.

The diversification strategy has been so successful that Plank explained during a recent investor conference call, "Women's has the potential to be larger than men's."

On the other hand, Lululemon is still a company that appeals primarily to women. Despite management's efforts to broaden the company's audience, a large part of Lululemon's business is still derived from female consumers since the company caters directly to yoga patrons. According to a 2012 study by Yoga Journal, 82% of people who practice yoga are female. In order for Lululemon to continue growing at substantial levels, the company needs to introduce more diversity in its product lineup.

Superior growth
Not surprisingly, Under Armour is outgrowing all of its major peers in terms of both revenue and earnings-per-share growth. The following is a breakdown of the company's projected growth in 2014 compared with that of Lululemon and industry stalwart Nike (NYSE:NKE)

Company

Lululemon

Nike

Under Armour

Revenue Growth 2014

18.5%

9.5%

21.9%

EPS Growth 2014

20.8%

11.5%

23.6%

*Nike's fiscal year ends in May

Under Armour's projected revenue growth rate of 21.9% and earnings-per-share growth of 23.6% lead those of both Lululemon and Nike. However, Lululemon is not too far behind, while Nike is still growing at very solid levels for a company with a market capitalization approaching $70 billion.

The industry-leading growth of Under Armour does come at a steep price for investors though. The company's forward P/E of 41.8 is extremely elevated compared to Lululemon's forward P/E of 24.1 and Nike's 21.8.

Future growth
There is no doubt that on a purely numerical basis, Under Armour is not the best bargain. While the company is projected to lead its competitors next year with regard to both revenue and EPS growth, Lululemon is not too far behind and offers a much cheaper valuation. Nike, on the other hand, remains the cheapest by far and also pays a nice dividend. Nike is also currently yielding 1.2%.

However, Under Armour has the most room for growth and is the best long-term growth play. Nike, of course, is already a global titan and Lululemon has not yet demonstrated it can properly diversify its product lineup to attract new types of consumers.

Under Armour has the brand strength and management team to make the company a worldwide leader in athletic apparel and footwear. All that is necessary for the company to succeed is to translate its immense brand strength into other product segments and geographic areas. Luckily, management at Under Armour has already shown that it is capable of doing this. Despite a fantastic 2013, Under Armour should still shine in 2014. 

Where else can you find great growth opportunities?
They said it couldn’t be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he’s ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen 6 picks for ultimate growth instantly, because he’s making this premium report free for you today. Click here now for access.

 

Philip Saglimbeni owns shares of Under Armour. The Motley Fool recommends Lululemon Athletica, Nike, and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers