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Final ppt under armour

This project includes the business information about Under Armour, Inc. It demonstrates the mastery of analyzing the current financial position of a company and predicting the future growth.

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Final ppt under armour

  1. 1. Team Members Brandon Carlson Qiongxi (Michelle) Luo Aditi Mishra Panchaya Pimprapoat Xiaochen (Ariel) Song Under Armour, Inc.
  2. 2. Company Overview Industry: Sports Apparel and Equipment Founded: 1996, Baltimore, Maryland CEO: Kevin Plank IPO: 2005 (UA) Market Cap: $18.4 Billion (as of Dec 3, 2015)
  3. 3. Major Milestones Under Armour was founded as an athletic apparel company New headquarter and warehouse in Baltimore Entered athletic footwear market IPO with revenue $281M Launched women's line $1B revenue
  4. 4. Consecutive Years of Revenue Growth $10B $20B $30B $40B (Founded) Source: UA Investor Day
  5. 5. Celebrity Endorsement
  6. 6. Company Overview Source: 2014 10K
  7. 7. Revenue Exposure by Country Source: FactSet as of October 22, 2015 Trailing Twelve Month Revenue: $3.7B % % % %
  8. 8. Global Expansion 226 stores 11 Countries 1.1 M SQ FT 1000+ stores 40+ Countries 3M+ SQ FT YE 2014 62% North America 38% International YE 2018 20% North America 80% International
  9. 9. Major Changes Acquisitions Change in management - MapMyFitness [Dec 2013] - Endomondo [Jan 2015] - MyFitnessPal [Feb 2015] - CFO/COO, Brad Dickerson to step down in Feb 2016 Automated Manufacturing - “Project Glory” - Physical space in Baltimore - Reduce human touches by up to 30% - Improved supply chain
  10. 10. Connected Fitness Platform
  11. 11. INDUSTRY & COMPETITIVE ANALYSIS
  12. 12. Global Sports and Apparel Industry Source: Statista $132B $135B $141B $146B $152B $158B $165B $171B Projected Industry in Billions
  13. 13. Athletic and Sporting Goods in the US 5 Year Expected Growth Revenue expected to increase at an annualized rate of 0.6% to $9.3B Key information: ● Highly competitive and fragmented with many brands competing ● Many mergers and acquisitions over recent years ● Increasing demand for versatile wear with wider functionality ● More health-conscious and older demographics ● Women = strong consumer demographic ● More collaboration between sports and fashion industry Major Market Segment 2015 Total volume: $9.1B Source: IBISWorld, Statista
  14. 14. Competitive Landscape Source: Yahoo Finance, FactSet Years as Public Company 0 5 10 15 20 25 30 35 40 45 Nike Adidas Lululemon V.F. Corporation Under Armour Columbia Sportswear $111.3B $27.2B $3.2B $18.4B $6.9B $40.0 $35.0 $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 LTMRevenueinBillions $19.6B
  15. 15. Performance Comparison (IPO Index) Under Armour Performance of a $100 Investment at IPO
  16. 16. SWOT Analysis •Focus on innovation •Strong financial performance •Growing product portfolio •Top-profile endorsement •Highly visible marketing campaigns •Revenue source is heavily depended on North America •Outsourced manufacturing - little control •International expansion •Athletic footwear market •Connected fitness •Project Glory •Women’s Apparel growth •Casual activewear •E-commerce •Low barriers of entry •Rising labor wages •Limited patent ownership •FX volatility
  17. 17. MANAGEMENT PERSPECTIVE & WALL STREET COMMENTS
  18. 18. Recent Performance Net Revenue by Product Products Q3 FY15 Q3 FY14 % increase Apparel $866M $705M +23% Footwear $196M $122M +61% Accessories $104M $85M +22% License revenues $24M $22M +9% Connected Fitness $14M $4M +221% Total $1.2B $938M +28% Net Revenue by Region Regions Q3 FY15 Q3 FY14 % increase North America $1.1B $848M +25% International $130M $86M +52% Connected Fitness $14M $4M 221% Total $1.2B $938M +25% Source: 10-Q ● First Billion dollar quarter
  19. 19. Analyst Feedback Before & After Earnings Call Average = $109.59 Median = $110.00 Average = $105.83 Median = $105.00
  20. 20. Analyst Feedback Before & After Earnings Call
  21. 21. Analyst Universe
  22. 22. Analyst Review of Q3 Earnings Call ● Future growth of Connected Fitness (SAP platform) - targeted consumer experience ● International retail and footwear expansion ● New e-commerce site ● Apparel growth for Womens & Casual activewear (ex. polo shirts, chinos) ● Robust revenue ● CFO search is a positive catalyst ● China retail strategy a new growth driver ○ Direct retail expansion in China: aims for 1,000-1,500 stores ○ 70% of stores to be run by distributors by 2018 ● China footwear aggressive growth UA warrants a higher valuation relative to peers Balanced by accelerated investments in key drivers:
  23. 23. Key Reasons for Stock Behavior Higher mix of footwear revenues Higher air freight costs Unanticipated FX Pressure Gross Margin Impact M&A of connected fitness New opportunities Management transition Investments
  24. 24. ● Partnership allows creating a single user database with insights on consumer purchase habits ● Advent to targeted marketing New Findings & Future Guidance for Investors Expand to Casual Activewear Connect Fitness & SAP Partnership Adding Talent in Women’s Footwear ● Hiring ● Women’s footwear focus ● Long-term investment in apparel for outside the gym (eg. polo shirts, chinos) ● Innovations in apparel functionality
  25. 25. Metrics 2015 2016 % increase Rev $3,923 $4,937 25.8% EBIT (Operating Income) 403.8 484.0 19.9% Operating Margin (OI/Rev) 9.7% 10.6% 9.0% EPS $1.10 $1.30 28.4% Analyst Conclusions via Ratio and Metrics Analysis
  26. 26. SHOULD WE BUY UNDER ARMOUR STOCK?
  27. 27. Common-Size Income Statement ● Net profit margins ( ) : Operating margins ( ) + Non-operating margins ( )
  28. 28. Ratio Analysis-Profitability ● ROE = Net Income / Equity ● Decrease of ROE: Increase on Equity > Increase on Net Income ● 3 Main attributes to Equity increase ○ Exercise of stock options ○ Issuance of common stocks ○ Converted convertible stocks
  29. 29. Ratio Analysis-Assets Turnover ● Loosen credit sales policy -> Credit risk ● Increasing inventory turnover on Q3-2015 due to credit sales
  30. 30. Ratio Analysis-Solvency Ratio ● Steady decline from 2010 to 2013 ● Strong recovery from 2013 to 2014 ● Strong Liquidity
  31. 31. Ratio Analysis-PE Band 78.3 ● The standard deviation band: ○ Measures the historical variation/volatility from the average PE ○ 95% fall within the range ● Recent performance suggested PE ratio: ○ Unpredictable of the future pattern 61.0
  32. 32. Source: All data and estimates from Bloomberg, LP Relative Valuation: Method of Comparables As of November 30, 2015 ($ in millions, except per share data)
  33. 33. Source: All data and estimates from Bloomberg, LP Relative Valuation: Method of Comparables As of November 30, 2015 ($ in millions, except per share data)
  34. 34. Source: All data from Bloomberg, LP Absolute Valuation: Discounted Cash Flow Method As of November 30, 2015
  35. 35. Source: All estimates from most recently published analyst reports Leading Investment Bank Estimates (DCF Inputs) As of November 30, 2015
  36. 36. Source: All estimates from most recently published analyst reports Leading Investment Bank Estimates (DCF Inputs) As of November 30, 2015
  37. 37. Discounted Cash Flow Output Market Price as of November 30th, 2015: Therefore: Fairly Valued! THEORETICAL VALUE PER SHARE $85.54 $86.22 Our Criteria: If absolute value + / - 10% of its current market price, Under Armour over / under valued
  38. 38. SHOULD A BANK LEND TO UNDER ARMOUR?
  39. 39. Credit Analysis Notes: [1] Total Debt to Assets ratio calculated as total liabilities divided by total assets, net of goodwill. Financial Strength Debt & Commitments Capacity to Repay
  40. 40. Concluding Remarks EQUITY INVESTMENT ● On comparable basis: overvalued ● Absolute value vs Market Price; fairly valued ● High risk/return potential; growth stock Debt Covenants - Additional issuance of debt is not permitted without our approval - The Company must maintain an Interest Coverage Ratio of at least 3.5x - The Company must not exceed a Leverage Ratio of greater than 2.5x DEBT INVESTMENT ● Strong balance sheet ● More than enough operating strength to sustain additional debt Is Under Armour’s growth sustainable?

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