The Main Fundamental Problems
In my recent article "Under Armour - Relative Valuation And Doubts", I explained why I maintain a neutral view on Under Armour's (UAA) (UA) shares despite some recent improvements in sales trends. My skepticism is based on two main factors:
1 - An Unattractive Valuation In Relative Terms
The market is already betting heavily on a turnaround that implies a return to the previous margins and a substantial improvement in sales growth. In particular, UAA is now trading above adidas (OTCQX:ADDYY) (OTCQX:ADDDF) in terms of EV/sales, a relative valuation discrepancy that warns of a potential non-rational behavior from the market. In the chart below, you can see that UAA is trading at an EV/Sales multiple above 2.3, compared with roughly 1.5 for adidas.
