Will This Downgrade Hurt Under Armor (UA) Today?

NEW YORK (TheStreet) -- Under Armor  (UA) has been downgraded to "neutral" from "buy," said Sterne Agee on Thursday. The firm said it was a valuation call as the stock is up 42% year-to-date. Sterne Agee also set a three-year price target of $170. 

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Separately, TheStreet Ratings team rates UNDER ARMOUR INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate UNDER ARMOUR INC (UA) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 15.9%. Since the same quarter one year prior, revenues rose by 35.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • UA's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.31, which illustrates the ability to avoid short-term cash problems.
  • UNDER ARMOUR INC has improved earnings per share by 25.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNDER ARMOUR INC increased its bottom line by earning $1.50 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.50).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry average. The net income increased by 28.0% when compared to the same quarter one year prior, rising from $50.13 million to $64.17 million.
  • The gross profit margin for UNDER ARMOUR INC is rather high; currently it is at 53.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.39% is above that of the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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