Why Under Armour, Inc. (NYSE:UAA) Could Be Worth Watching

By
Simply Wall St
Published
January 25, 2022
NYSE:UAA
Source: Shutterstock

Under Armour, Inc. (NYSE:UAA), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$26.96 at one point, and dropping to the lows of US$18.51. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Under Armour's current trading price of US$19.33 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Under Armour’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Under Armour

What is Under Armour worth?

According to my valuation model, Under Armour seems to be fairly priced at around 10.89% above my intrinsic value, which means if you buy Under Armour today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $17.43, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Under Armour’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Under Armour look like?

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NYSE:UAA Earnings and Revenue Growth January 25th 2022

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. With profit expected to grow by a double-digit 10% over the next couple of years, the outlook is positive for Under Armour. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in UAA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on UAA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Under Armour, and understanding these should be part of your investment process.

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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