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Mindset Mastery

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Edgar Mironov
Edgar Mironov

Should I Buy Under Armour Stock



The Value Scorecard identifies the stocks most likely to outperform based on its valuation metrics. This list of both classic and unconventional valuation items helps separate which stocks are overvalued, rightly lowly valued, and temporarily undervalued which are poised to move higher.




should i buy under armour stock



Conventional wisdom says that a PEG ratio of 1 or less is considered good (at par or undervalued to its growth rate). A value greater than 1, in general, is not as good (overvalued to its growth rate). For example, a company with a P/E ratio of 25 and a growth rate of 20% would have a PEG ratio of 1.25 (25 / 20 = 1.25). A company with a P/E ratio of 40 and a growth rate of 50% would have a PEG ratio of 0.80 (40 / 50 = 0.80). Traditionally, investors would look at the stock with the lower P/E and deem it a bargain. But when compared to its growth rate, it does't have the earnings growth to justify its P/E. In this example, the one with the P/E of 40 is the better bargain because it is selling at a discount to its growth rate. So the PEG ratio tells you what you're paying for each unit of earnings growth.


A stock with a P/E ratio of 20, for example, is said to be trading at 20 times its annual earnings. In general, a lower number or multiple is usually considered better that a higher one. Value investors will typically look for stocks with P/E ratios under 20, while growth investors and momentum investors are often willing to pay much more. Aside from using absolute numbers, however, you can also find value by comparing the P/E ratio to its relevant industry and its peers.


For example, a stock trading at $35 with earnings of $3 would have an earnings yield of 0.0857 or 8.57%. A yield of 8.57% also means 8.57 cents of earnings for $1 of investment. The most common way this ratio is used is to compare it to other stocks and to compare it to the 10 Year T-Bill. Conventional wisdom also has it that if the yield on the stock market (S&P 500 for example) is lower that the yield on the 10 Yr., then stocks would be considered overvalued. Conversely, if the yield on stocks is higher than the 10 Yr., then stocks would be considered undervalued. Since bonds and stocks compete for investors' dollars, a higher yield typically needs to be paid to the stock investor for the extra risk being assumed vs. the virtual risk-free investment offered in U.S.-backed Treasuries.


This measure is expressed as a percentage. A higher number means the more debt a company has compared to its capital structure. Investors like this metric as it shows how a company finances its operations, i.e., what percentage is financed thru shareholder equity or debt. A ratio under 40% is generally considered to be good.But note; this ratio can vary widely from industry to industry. So be sure to compare it to its group when comparing stocks in different industries.


One of the top athletic apparel brands has been a lousy investment over the last 10 years. Shares of Under Armour (UA 1.91%) (UAA 2.04%) are down 28% since April 2012, underperforming the S&P 500 return of 209%. But the stock could be set for much better showing over the next decade.


Under CEO Patrik Frisk, who took over in Jan. 2020 for company founder Kevin Plank, Under Armour has gotten itself in fighting shape. Revenue and margins are rising, and its disciplined approach to managing costs could be rewarded with a higher stock price soon enough.


At a share price of under $15, Under Armour's class A shares trade at a price-to-earnings ratio of 19.7, which is a steep discount to the valuations of comparable apparel stocks like Nike and Lululemon.


That's because there's a third share class, Class B shares, which aren't traded publicly and are owned entirely by Under Armour founder and executive chairman Kevin Plank. Each Class B share comes with 10 votes. This means that while Plank owns less than 15% of all Under Armour stock outstanding, he controls nearly 65% of the voting power, rendering the votes of Class A shareholders irrelevant.


Since the stock is closer to the resistance from accumulated volume at $10.09(6.32%) than the support at $8.63(9.06%), our systems don't find the trading risk/reward intra-dayattractive and any bets should be held until the stock is closer to the support level.


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Under Armour's revenue didn't grow at all in the last year. In fact, it fell 7.1%. That looks pretty grim, at a glance. The share price drop of 51% is understandable given the company doesn't have profits to boast of. Having said that, if growth is coming in the future, the stock may have better days ahead. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.


We regret to report that Under Armour shareholders are down 51% for the year. Unfortunately, that's worse than the broader market decline of 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Under Armour .


As a fullback at the University of Maryland, Plank got tired of having to change out of the sweat-soaked T-shirts worn under his jersey; however, he noticed that his compression shorts worn during practice stayed dry. This inspired him to make a T-shirt using moisture-wicking synthetic fabric.[5] After graduating from the University of Maryland, Plank developed his first prototype of the shirt, which he gave to his Maryland teammates and friends who had gone on to play in the NFL. Plank soon perfected the design, creating a new T-shirt built from microfibers that wicked moisture and kept athletes cool, dry, and light.[4] Major competing brands including Nike, Adidas and Reebok would soon follow in Plank's footsteps with their own moisture-wicking apparel.[6] Plank opted to use the British spelling "armour" in the company name because the toll-free vanity number was still available for that version.[7]


It's been a dismal year for Under Armour stock, which has lost over 68% in the last 12 months. A familiar rejection level at the 80-day moving average sent UAA to a 12-year low of $6.38 on Sept. 30, and it looks like the stock could see even more lows, should today's negative price action continue. 041b061a72


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