At $13.8, Is Under Armour Inc (NYSE:UA) A Buy?

Under Armour Inc (NYSE:UA), a luxury company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Under Armour’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Under Armour

What's the opportunity in Under Armour?

According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 47.71x is currently well-above the industry average of 21.75x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Under Armour’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Under Armour generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 8.67% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Under Armour, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in Under Armour’s outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Under Armour should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on Under Armour for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Under Armour. You can find everything you need to know about Under Armour in the latest infographic research report. If you are no longer interested in Under Armour, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.