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Why We're Buying Adidas

The video below is part of The Motley Fool's "11 O'Clock Stock" series. where we're recommending a new stock every weekday at 11 a.m. ET on for 50 weekdays. To see a video of co-founder Tom Gardner explaining the series, click here. To see our original recommendation of Adidas (Pink Sheets: ADDYY.PK), click here.

In the video below, Global Gains advisor Tim Hanson explains why he thinks Adidas deserves a place in your portfolio. The shoemaker occupies a competitive athletic apparel field, amid companies like Nike (NYSE: NKE  ) and Under Armour (NYSE: UA  ) . Yet it trades at levels below its peers, despite a strong global brand. As Hanson said in his original recommendation of the company:

So what about that relationship between Nike and Adidas? If you look over the trailing 15-year period, you'll see that Nike's EV/sales ratio has been approximately 1.5 times higher than Adidas's, and its EV/EBITDA ratio approximately 1.1 times higher. Today, those ratios are 1.9 and 1.2 times, respectively. Does Nike deserve that much of a premium given Adidas' fast-growing sales and the ongoing revival in its previously profit-challenged Reebok division? I certainly don't think so. As the market picks up on this discrepancy, we should see Adidas's multiples expand. 

To see Tim Hanson's full thoughts on Adidas, watch the video below.

Under Armour is a Motley Fool Rule Breakers recommendation. Nike is a Motley Fool Stock Advisor pick. Adidas is a Motley Fool Global Gains recommendation. Under Armour is a Motley Fool Hidden Gems pick. The Fool owns shares of National Bank of Greece SA and Under Armour. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Tim Hanson is co-advisor of Motley Fool Global Gains. Follow him on Twitter. He does not own shares of any company mentioned. The Fool's disclosure policy recommends a research trip to Greece.

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