What Is Under Armour, Inc.'s (NYSE:UAA) Share Price Doing?

Under Armour, Inc. (NYSE:UAA), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Under Armour’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Under Armour

Is Under Armour Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.31x is currently trading slightly below its industry peers’ ratio of 13.68x, which means if you buy Under Armour today, you’d be paying a decent price for it. And if you believe that Under Armour should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Under Armour’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Under Armour?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Under Armour, it is expected to deliver a negative earnings growth of -4.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, UAA appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on UAA, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on UAA for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on UAA should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Under Armour, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Under Armour you should be aware of.

If you are no longer interested in Under Armour, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.