Under Armour (UA) May Be Too Overvalued for Growth Expectations -Barron's
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Under Armour, Inc. (NYSE: UA) is trading lower Tuesday morning as Barron's called the stock "overvalued" in an article over the holiday weekend.
Barron's pointed out shares have rallied about 130 percent in the past year to around $78. Shares are up about 533 percent from lows of $12.33 in early 2009. Upside has the stock trading for 45x expected FY11 EPS of $1.73. Enterprise value is 20 times EBITDA, about double of rivals.
The numbers make the stock look expensive even against ambitious expectations for sales of $2 billion by 2013. With increasing competition as well as increasing input costs, Barron's thinks the stock may be a little rich to invest in. Other caveats include stagnant footwear sales as well as slower-than-expected international growth.
Some analysts have the stock falling to the mid-$60s by next year.
Though Under Armour saw growth in both its revs and net income last quarter, its expectations for a one percent decline in gross margins in FY11 and a 68 percent increase in inventories last quarter isn't causing investors to rush back in.
Morningstar values the shares closer to $41, with a 24x multiple, saying current prices anticipate a lot of growth. EBIT would need to grow in the low to mid-20 percent range over the next ten years for that sort of valuation.
Bullish calls on the stock stem from an expected increase in prices, as well as strong adaptation for Charged Cotton, and Under Armour's planned expansion of its retail business.
Barron's said, however, insiders have been selling. CFO Brad Dickerson recently cut his stake to 50 from 5,000 in 2008, when he became CFO of Under Armour.
Shares are down 0.5 percent to $78.80 Tuesday morning.
Barron's pointed out shares have rallied about 130 percent in the past year to around $78. Shares are up about 533 percent from lows of $12.33 in early 2009. Upside has the stock trading for 45x expected FY11 EPS of $1.73. Enterprise value is 20 times EBITDA, about double of rivals.
The numbers make the stock look expensive even against ambitious expectations for sales of $2 billion by 2013. With increasing competition as well as increasing input costs, Barron's thinks the stock may be a little rich to invest in. Other caveats include stagnant footwear sales as well as slower-than-expected international growth.
Some analysts have the stock falling to the mid-$60s by next year.
Though Under Armour saw growth in both its revs and net income last quarter, its expectations for a one percent decline in gross margins in FY11 and a 68 percent increase in inventories last quarter isn't causing investors to rush back in.
Morningstar values the shares closer to $41, with a 24x multiple, saying current prices anticipate a lot of growth. EBIT would need to grow in the low to mid-20 percent range over the next ten years for that sort of valuation.
Bullish calls on the stock stem from an expected increase in prices, as well as strong adaptation for Charged Cotton, and Under Armour's planned expansion of its retail business.
Barron's said, however, insiders have been selling. CFO Brad Dickerson recently cut his stake to 50 from 5,000 in 2008, when he became CFO of Under Armour.
Shares are down 0.5 percent to $78.80 Tuesday morning.
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