Is Under Armour Stock a Buy Right Now?

Under Armour (NYSE:UA)(NYSE:UAA) has taken shareholders on quite a roller coaster ride for some time, but could it be the best fitness stock you can buy today? In this Fool Live video clip, recorded on June 4, contributor Jason Hall discusses why Under Armour is the top fitness pick on his list. 

Jason Hall: That’s right. This is a company I followed for a long time. Boy oh boy, has it been been a journey for anybody that’s owned or followed Under Armour for a long time because I don’t remember the exact numbers, but at one point, the company had grown revenues not just year-over-year, but every quarter, it grew revenues 20% or more. I think it was like the first 10 years of its existence, it was this incredible period of time and it was an incredible investment over that period of time.

But at the same time, the company was spending tons of money to build out, it got bloated. Manufacturing capacity, internals, just the employee count, the administrative staff spent hundreds of millions of dollars on digital connected fitness apps, and then things got not too good on the sales side.

In North America we saw a major slow down in demands and everybody was affected. Nike was affected, adidas, Reebok. Everybody else was affected. At the same time, some of the big like Sports Authority and another one of the really large athletic apparel and footwear retailers went out of business. Just that retail footprint just evaporated, and that was really, really important for Under Armour especially.

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It was focused on digital growth overseas largely, but it was really still tied to retailers in the U.S. They tried to do a deal with Kohl‘s that really just didn’t replace that lost retail presence. It was ugly. I mean, it was a terrible period, the stock is still down like half from its all-time high about five years ago. Long story short, Kevin Plank, the former CEO and the founder of the company stepped down about a year and a half ago, Patrik Frisk took over. He’s been the CEO for that period. It seems like things were really starting to pay off. The company had started some efforts to revitalize the business before Plank stepped down, but those efforts have continued over the time, and it’s starting to pay off.

Sales are starting to grow again in North America. Just reported its most recent quarter, sales were up 32% in the U.S. Now, in fairness, part of that was because last year, this was a terrible time to be selling anything in retail stores. Part of it was because they had a great quarter to comp too, but revenue overseas continued to grow at a super high rate too, so that is a real positive. I think 58% international sales growth in the quarter, book to $78 million profit. There’s some positive things right there. Company raised guidance, had previously been guiding for single-digit revenue growth for the year, now it’s saying it’s going to grow in the high teens.

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Lots of positive things that are happening there. The company is actually still forecasting that it’s going to lose money this year because there are more financial restructuring that has to happen, so it has to still book some losses for some things. I think if you add it all up and there’s something interesting. It’s lapped a bad period of time, it looks like sales growth is starting to reignite, it’s starting to get some traction. Again, six months ago if you were asked me the question, do you like Under Armour? Is it interesting? I would’ve said not really because I’m still concerned about their business trajectory. That’s what’s changed for me, the business trajectory has changed when you think about valuations, and that’s why this was my highest rated one.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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