Trade-Ideas: Under Armour (UA) Is Today's Momo Momentum Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Under Armour ( UA) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Under Armour as such a stock due to the following factors:

  • UA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $150.4 million.
  • UA has a PE ratio of 83.3.
  • UA is currently in the upper 30% of its 1-year range.
  • UA is in the upper 25% of its 20-day range.
  • UA is in the upper 35% of its 5-day range.
  • UA is currently trading above yesterday's high.
  • UA has experienced a gap between today's open and yesterday's close of 0.6%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

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More details on UA:

Under Armour, Inc., together with its subsidiaries, develops, markets, and distributes branded performance apparel, footwear, and accessories for men, women, and youth primarily in North America, Europe, the Middle East, Africa, Asia, and Latin America. UA has a PE ratio of 83.3. Currently there are 12 analysts that rate Under Armour a buy, 1 analyst rates it a sell, and 11 rate it a hold.

The average volume for Under Armour has been 2.7 million shares per day over the past 30 days. Under Armour has a market cap of $12.3 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.13 and a short float of 8.9% with 5.76 days to cover. Shares are up 61.9% year-to-date as of the close of trading on Tuesday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Under Armour as a buy. 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, impressive record of earnings per share growth, expanding profit margins and compelling growth in net income. 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 ratings report include:
  • The revenue growth came in higher than the industry average of 16.6%. Since the same quarter one year prior, revenues rose by 29.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 1.42, which illustrates the ability to avoid short-term cash problems.
  • UNDER ARMOUR INC has improved earnings per share by 20.6% 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 $0.75 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($0.94 versus $0.75).
  • The gross profit margin for UNDER ARMOUR INC is rather high; currently it is at 51.53%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.50% trails the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Textiles, Apparel & Luxury Goods industry average. The net income increased by 22.4% when compared to the same quarter one year prior, going from $72.78 million to $89.11 million.

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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