Under Armour Reinvestment Austin Wallestad, Derek Koster, Sarah Spaeth, and Mark Elliott Agenda Financial Statement Analysis Evaluation of Turnaround Strategies Intrinsic Value Estimation Overall recommendation
Encouraging Report? Increased revenue Increased by 5% to 1.4 billion Increased revenue in foreign markets 45% increase in EMEA 55% increase in Asia-Pacific
source:http://investor.underarmour.com/releasedetail.cfm?ReleaseID=1057284 Financial Statement AnalysisBalance Sheet Total Long Term Debt consistently increasing from 70.8 million in 2011 to 790.4 million in 2016 Total assets increasing Financial Statement AnalysisIncome Statement Sales increasing
Selling at clearance-level prices SG & A increasing consistently Net Income Ratios Liquidity Ratios Current Ratio Current Assets / Current Liabilities Shows extent liabilities are covered by assets
Ratios Asset Management Ratios Total Asset Turnover (12.25) Sales / Total Assets Sales up to 4976.6 million, Net Income down to -48.3 million Days Sales Outstanding (45.19) Accounts Receivable / (Sales / 365)
How long firm waits to receive cash from sales Fixed Asset Turnover (5.62) Sales / Net Fixed Asset Measures how effectively firm uses plant & equip. Ratios Debt Management Ratios Total Debt to Total Asset (22.89)
Total Debt / Total Assets Shows percentage of capital that comes from debt Although having debt is not necessarily a negative component of a company, when long term debt continues to increase year after year, investors should be hesitant to place their funds in a company. Ratios Profitability Ratios Return on Assets (-1.26)
Net Income / Total Assets Return on Equity (-2.38) Net Income / Common Equity Measures rate of return on stockholders investment Profit Margin (-.01) Net Income / Sales Measures Net Income per dollar of sales
Current turnaround strategy Product elimination Connected Fitness ($55 million) Footwear Wont work 2% market Share Social media analysis
Current turnaround strategy International strategy Larger Market Competitor revenues Branding Our Recommendations
Athleisure Presence Increase international presence Deeper focus (21.8%) Celebrity Profiling Compete with competitors UAA Stock Stock has been going down since 2015
Current Price: $17.36 Stock market has gone up over the same period Recent resurgence Expectations Source:https://www.nasdaq.com/symbol/ua/stock-chart? intraday=off&timeframe=5y&splits=off&earnings=off&movingaverage=None&lowerstudy=volume&comparison=on&index=sp500&drilldown =off
FCF Analysis Negative FCF for the last 3 years FCF of -$255 million for 2017 Nikes FCF: 2.54 billion More liabilities than their cash can cover Increasing debt and high WACC
Ratios P/E ratio: 44 Nike: 21 and Lululemon: 26 EV/EBITDA ratio: 18 Nike: 17 and Adidas: 13 Overvalued
Estimation of Intrinsic Value Ratios and current stock price Multiple sources Estimated Intrinsic Value: $4-5 Source:https://www.gurufocus.com/term/iv_dcf_share/UA/Intrinsic-Value-Projected-FCF/Under-Armour-Inc Source:https://finance.yahoo.com/news/under-armour-undervalued-153448073.html Source:https://simplywall.st/stocks/us/consumer-durables/nyse-uaa/under-armour
Overall Recommendations Future outlook of Under Armor does not look promising enough to promote investment in the company Competitors increasing international efforts to minimize Under Armors market share Celebrity endorsements not being utilized to full potential Brand does not have evidence of producing products that will attract new market trends Stock is overvalued, resulting in low intrinsic value
Recap Financial Statement Analysis Evaluation of Turnaround Strategies Intrinsic Value Estimation Overall recommendation Questions? Contact information
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