Summary
Under Armour continues to cut costs without impacting revenue targets.
The company has the ability to substantially hike margins over the next few years as products improve.
Investors should use a base case of operating margins in the 10% range and a nearly $1 EPS target in valuing the stock.
In the meantime, the P/S multiple remains the best metric to value the stock.
The prime reason that Under Armour (UA, UAA) doesn't trade based on the P/E multiple is that the company has substantial margin upside. CEO Kevin Plank built a $5 billion revenue brand without placing much emphasis on operational efficiencies that the company is now implementing. The premium brand actually has margin upside potential above their biggest peer that would ultimately make the stock an incredible bargain at $20. My investment thesisremains very bullish on this turnaround at the premium athletic apparel brand.
Image Source: Under Armour website
