The company has lost its shine in a sea of slower growth and less hype around the athletic and footwear maker. On the backdrop is the doubt about its leadership and the accounting woes that followed, worsened by the unpopular acquisition. Even a brighter sales figure did not let it jumpstart from its low.
🛹A makeover that is inspiring but weak🪂
Since the new CEO Patrik took over the helm in 2020, there has been scepticism about its transformation plan. Yet, the pandemic arrived, and earnings per share rose sharply as it rode on the tailwind. While the balance sheet has improved, the stocks remain languished.
The company has reduced its product range drastically, shifting gear towards profitability. Some analysts are seeing encouraging signs that the earnings (EBITDA) will hit a high level in the next few years. This is supported by the expansion of profit margin, which had hit 50% in 2021 as the company generates more cash.
🏄♀️Finance is getting better🏅
In 2021, the company generated around $800 million, representing about 8.4% of its market value. It ends the year in a robust balance sheet condition with $1.7 billion in cash and equivalents. That is double its 2019 level.
The announcement of a share buyback of $500 million for the first time has signalled its route towards a more shareholder-friendly company.
🎤Investors are not warming to its prospect🎻
Despite the better outlook, market participants appeared to skip its shine. It is trading at some discount level to its historical averages on a Price-to-Sales and Price-to-Cash flow ratio basis.
Indeed, the company’s confidence level is lower compared to Nike. Analysts expect the company to earn 79 cents per share in 2022 compared to 77 cents last year.
North America is still the most significant market representing 60% of its sales, but volume growth in Asia is where prospects are. While it does not have the same aura as the likes of Nike and Adidas, its sales have jumped 32% last year for its Asia region. Thus, global growth has to be the catalyst for future share appreciation.
🎬Headwinds Ahead🗽
The company is not immune to problems faced by the industry. This includes supply chain issues and a possible lower in consumers’ discretionary spending at the height of inflation (as supported by our prior writing). The lockdown in Asia (esp China) weighs on demand.
The tide might be too high a call for Under Armour to surpass. Investors are looking for more quarters of positive results before betting on a comeback despite having more net cash than ever in its corporate history.
More Stories
🚀It’s time for a re-assessment; then came Nvidia’s boost.🚀
A flip-flop markets into earnings season
Nvidia pushes the market to roar back.