{"id":273383,"date":"2023-09-12T11:06:08","date_gmt":"2023-09-12T15:06:08","guid":{"rendered":"https:\/\/financhill.com\/blog\/?p=273383"},"modified":"2023-09-12T12:11:26","modified_gmt":"2023-09-12T16:11:26","slug":"under-armour-vs-nike-stock","status":"publish","type":"post","link":"https:\/\/financhill.com\/blog\/investing\/under-armour-vs-nike-stock","title":{"rendered":"Under Armour Vs Nike Stock: Which Is Best?"},"content":{"rendered":"<p><strong>Nike (<a href=\"https:\/\/financhill.com\/stocks\/sp500\/nke\">NYSE:NKE<\/a>)<\/strong> and <strong>Under Armour (<a href=\"https:\/\/financhill.com\/stocks\/sp500\/ua\">NYSE:UA<\/a>) <\/strong>may both be familiar names to sports enthusiasts but comparing them is more akin to a David and Goliath contrast than an apples to apples one. That&#8217;s because Nike is about 45 times larger than Under Armour.&nbsp;<\/p>\n<p>But that&#8217;s not the only difference between these two sports apparel companies. As you&#8217;ll discover, one has a sustainable moat, and the other is more of a commodity retailer. In the battle between Under Armour vs Nike, which is best? You&#8217;re about to find out.<\/p>\n<h2>Is Nike a Good Stock to Buy?<\/h2>\n<p>When you zoom out, you&#8217;ll find Nike is the Goliath in this battle with a $148.1 billion market capitalization thanks to its global footprint and massive sales, which were last quarter clocked at $12.8 billion.<\/p>\n<p>Indeed on an annual basis, sales have been impressive too. For the fiscal years 2021, 2022, and 2023, Nike reported sales growth of 19.1%, 4.9%, and 9.6%, respectively.<\/p>\n<p>Those numbers aren&#8217;t too shabby but they certainly haven&#8217;t translated to share price gains &#8211; Nike share price is down 18.6% for the year, an astonishing underperformance relative to the S&amp;P 500, which is sitting pretty with a 16.9% gain.<\/p>\n<p>A declining share price isn&#8217;t all bad, though. As NKE fell, its <a href=\"https:\/\/investors.nike.com\/investors\/news-events-and-reports\/default.aspx\" target=\"_blank\" rel=\"noopener\">dividend yield improved to 1.41%.<\/a> Income investors have been able to ride a 21 year streak of dividend payments. And it&#8217;s likely to continue because Nike&#8217;s payout ratio of 39.68%, which signals management is not sacrificing cash flows for growth.<\/p>\n<p><iframe loading=\"lazy\" style=\"margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/widget\/charts\/NKE?defaultOverlays=EMA20%2CSMA50&amp;periodGrouping=daily&amp;defaultSeries=candlesticks\" width=\"720\" height=\"439\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<p>On a valuation basis, the P\/E ratio clocks in at a frothy 29.1x, a metric that might raise some eyebrows, though it must be recognized that quality often commands a premium.<\/p>\n<p>When it comes to returns, Nike boasts a return on invested capital (ROIC) of 18.8%, a very impressive number that tells us how well management is doing at converting capital to profits.<\/p>\n<p>More significantly, it reveals Nike has a moat that is wide because few companies can sustain elevated ROICs for long periods unless they have sustainable competitive advantages.<\/p>\n<p>For Nike that moat is its brand advantage, and the Swoosh. Simply put, consumers trust the Nike brand and many become life long customers, increasing the company&#8217;s customer lifetime value.<\/p>\n<p>When you put it all together, you end up with a compelling value proposition, and analysts are on board. Out of 33 analysts covering the stock, the average price target is $128.21, offering significant upside from the current share price under $100.<\/p>\n<h2>How Does Under Armour Measure Up?<\/h2>\n<p>Switching gears to the David in our battle, Under Armour has experienced a more choppy top line.<\/p>\n<p>Sales growth for 2021 was a robust 27.0%, but it tapered off to just 0.8% in fiscal year 2022 and slightly picked up to 3.1% in 2023. Not terrible, but not nearly as consistent as Nike.<\/p>\n<p>The top line may not be as impressive but what about Under Armour&#8217;s dividend? Nonexistent, as it turns out. The company pays no dividend, which may be a deal-breaker for some investors who are on the hunt for income while waiting for share price appreciation.<\/p>\n<p>The market capitalization of Under Armour is a more modest $3.04 billion, making it the underdog in this match-up. Nike is literally 45x larger thanks to its global footprint and broader product line offerings.<\/p>\n<p>But Under Armour is attractive on a price-to-earnings ratio basis, featuring a lean 7.9x multiple that suggests the market is not valuing it at the same premium as Nike.&nbsp;<\/p>\n<p><iframe loading=\"lazy\" style=\"margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/widget\/charts\/UA?defaultOverlays=EMA20%2CSMA50&amp;periodGrouping=daily&amp;defaultSeries=candlesticks\" width=\"720\" height=\"439\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<p>Where Nike and Under Armour really diverge is on returns on invested capital. Under Armour&#8217;s ROIC is a modest 6.4% and signals that the company has failed to build a defensible moat against other sportswear competitors.<\/p>\n<p>Generally, that means management cannot price goods at a premium, but rather is forced into a commodity game that competes in the marketplace on price. That is in stark contrast to Nike which famously can manufacture goods efficiently and inexpensively but charge high amounts.<\/p>\n<p>When it comes to financial standing, <a href=\"https:\/\/about.underarmour.com\/en\/investors\/financials\/quarterly-results.html\" target=\"_blank\" rel=\"noopener\">Under Armour has $711 million in cash<\/a> and $1.52 billion in total debt, meaning it simply doesn&#8217;t have the capital reserves to take on a titan like Nike anytime soon. By way of contrast, Nike enjoys $7.4 billion in cash, $3.2 billion in short-term investments and has $12.1 billion in total debt.<\/p>\n<p>Still, Under Armour has a shine to it when you look under the hood at cash flows. Our own discounted cash flow forecast reveals Under Armour has a fair value of $11.25 per share, implying a massive 70.1% upside potential.&nbsp;<\/p>\n<h2>Nike vs Under Armour Stock: Which Is Best?<\/h2>\n<p>In this David and Goliath battle, both Under Armour and Nike offer different value propositions. Nike is better suited to the long-term investor who wants to own a company with a defensible moat, has deep cash reserves, and pays a modest, yet sustainable, dividend along the way.<\/p>\n<p>Under Armour, on the other hand, is the minnow in the ocean to Nike&#8217;s whale. Its small size allows it to be more nimble, however, and potentially offers much greater upside &#8211; as high as 70% by our calculations.<\/p>\n<p>Nike&#8217;s sheer size and consistent performance make it a more stable choice for conservative investors while those looking for a swing at bat that could lead to a home run could find Under Armour to be the more compelling choice.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nike (NYSE:NKE) and Under Armour (NYSE:UA) may both be familiar names to sports enthusiasts but comparing them is more akin to a David and Goliath contrast than an apples to apples one. That&#8217;s because Nike is about 45 times larger than Under Armour.&nbsp; But that&#8217;s not the only difference between these two sports apparel companies. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":528649,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[22],"tags":[346,772,672,318,1326],"class_list":["post-273383","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-gic","tag-nke","tag-pro","tag-tgt","tag-ua"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/financhill.com\/blog\/wp-content\/uploads\/2018\/10\/Untitled-design-2023-09-12T113003.074-1.jpg","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9czeV-197p","_links":{"self":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/273383","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/comments?post=273383"}],"version-history":[{"count":5,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/273383\/revisions"}],"predecessor-version":[{"id":528651,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/273383\/revisions\/528651"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media\/528649"}],"wp:attachment":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media?parent=273383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/categories?post=273383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/tags?post=273383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}