Under Armour (NYSE:UAA) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Under Armour (NYSE:UAA) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Under Armour is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.063 = US$202m ÷ (US$4.3b - US$1.1b) (Based on the trailing twelve months to June 2025).

So, Under Armour has an ROCE of 6.3%. Ultimately, that's a low return and it under-performs the Luxury industry average of 13%.

View our latest analysis for Under Armour

Above you can see how the current ROCE for Under Armour compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Under Armour .

How Are Returns Trending?

Under Armour's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 135% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line

To sum it up, Under Armour is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 49% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for UAA on our platform that is definitely worth checking out.

While Under Armour isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.