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When a Hot Stock Breaks a Sweat by Christopher C. Williams

Summary: Kevin Plank, Chairman of Under Armour (NYSE:UA) and a former athlete, hopes he's the next Nike (NYSE:NKE) on the field. Sales of $421 million in 2006, up from $5 million in 2000, would say he's getting there. The company, which bases its sports apparel on a sweat-deflecting material, uses broad advertising, know-how in sports and name-branding. This has all impressed investors, who've brought the stock up to a recent $51, with a hefty P/E ratio of 80. UnderArmour 21 01 2007 ChartMain competitor Nike boasts a moderate 17x, and has no intention of forfeiting market share to UA. Both Adidas (OTCQX:ADDYY) and Nike have introduced similar products; the fact that UA doesn't hold any patents on its anti-sweat wear means it has to rely on name recognition. An extremely high valuation leaves management no room for error, and with investors with equally high expectations. Goldman Sachs values the stock at 44, about 12% below current levels. Future plans for UA include overseas expansion, increased sales to women and children, and moving onto the basketball court. The competition is sure to stay close on its heels in those areas, too. Bottom Line: The stock could fall far if the young company stumbles. Competitors are storming its market.
Related: Under Armour: Don't Push Your Luck, The Long Case For Nike - 'Just Do It', Barron's: Adidas' Reebok Acquisition Should Eventually Provide Big Growth

Source: Under Armour: The Time Has Come to Sweat This Stock - Barron's