With the 2011 – 2012 football season underway, let’s take a look at some football related stocks. The products in this article are used by the players, the fans, or a combination of both. Some are seen on the field or in the stadiums and others are heavily advertised during games throughout the season.
Nike makes the cleats that football players wear on game day. You’ll also see fans sport Nike’s various footwear, shirts, and other apparel. You will see them advertised during games with popular players such as Michael Vick, Ladainian Tomlinson, and Shawne Merriman.
Nike stock looks fairly valued with a forward P/E of 14.68 and a PEG of 1.49. Its stock price is trading at less than 5 times book value per share. It paya a modest dividend of 1.4%. Nike has grown earnings annually at 9.38% in the last five years and is expected to grow them annually at 12% for the next five years. It should easily beat the market with its widespread exposure and popular products.
Under Armour (UA)
When the weather gets cold, chances are the players and many fans are wearing insulating Under Armour shirts and legwear to keep their bodies as warm as possible. Its products are made from moisture-wicking synthetic fibers to regulate body temperatures. Under Armour is a newer company, founded in 1996 and based in Baltimore.
Under Armour stock is not trading at an ideal value right now with a forward P/E of 29.88 and a PEG of 1.76. However, it has total cash of $119.7 million compared to a total debt of $36.9 million. It has grown earnings annually at 8.31% in the past five years and is expected to grow them at an aggressive 21.5% for the next five years. If it can meet or beat these expectations, the stock should perform well at the rate that it grows earnings.
Anheuser-Busch InBev (BUD)
You have to love the BUD ticker symbol. Here’s a product that is a little more for the fans than the players. This beer brewer manages a list of about 200 brands of beer. Some of the popular brands are: Budweiser, Becks, Michelob, Harbin, and Bud Light. It has some of the most entertaining commercials during games.
BUD’s financials look attractive and well valued. It sports a forward P/E of 11.9 and a PEG of 0.98. The stock is trading at only 2.21 times book value per share which is very nicely valued. BUD enjoys a nice profit margin of 12.76% and an operating margin of 30.66%. It is expected to grow earnings annually at 14.75% for the next five years. If it can hit these expectations, the stock should beat the performance of the S&P 500 index.
Pepsico Inc. (PEP)
Gatorade is one of Pepsi’s many brands that are consumed by football players and fans alike. The fans will consume some of the many beverage brands that Pepsi offers including Pepsi sodas, Dole juices, SoBe drinks, Amp energy drinks, Naked Juice, and Ocean Spray drinks. Pepsi has many snack brands that are also consumed by the fans.
Pepsi pays a nice dividend of 3.3%. It is fairly valued with a forward P/E of 12.37 and a PEG of 1.62. It has more debt ($27.32 billion) than total cash of $3.34 billion. Pepsi does have a steady operating cash flow of $8.36 billion. It is expected to grow earnings annually at 8.53% for the next five years, which lags the S&P 500’s expected earnings of 10.71%.
Coca Cola (KO)
Pepsi’s rival, Coke, owns Powerade – Coke’s answer to Gaterade. Powerade is used by players and active fans. You’ll see Powerade commercials during football games which show star players working out and consuming the product. Coca Cola also airs its various soda commericals during games for its standard Coke brand products such as the ‘Open Happiness’ theme or the positive ‘Reasons to Believe’ theme.
Coca Cola has a forward P/E of 16.13 and a PEG of 1.99. Its stock price is trading at 4.52 times book value per share. It has a total cash figure of $14.02 billion. Its current dividend pays 2.7%. Coke is expected to grow earnings annually at 9.23% for the next five years. It should have steady growth that matches or beats the returns of the market by a few percentage points annually.
Sysco Corp. (SYY)
Sysco handles food and food related products at many of the stadiums and hotels around the country. Its food product line includes: frozen foods, canned and dry foods, fresh meats, seafood, poultry, dairy products, beverages, and fresh produce. Its food related products includes: plates, napkins, cups, silverware, cookware (pots, pans, & utensils), restaurant & kitchen equipment/supplies, and cleaning supplies.
Sysco has a forward P/E of 12.03 and a PEG of 2.1. The stock trades at only 3.36 times book value per share. It pays a generous dividend of 3.8%. Its earnings are steady, but not all that spectacular. Sysco is expected to grow earnings annually at 6.23% for the next five years. When you combine the expected earnings with the dividend yield (10.03%), Sysco may lag the expected five year returns of the overall stock market of 10.73%.
Many football fans subscribe to DirectTV for the NFL Sunday Ticket plan, which gives subscribers viewing access to all of the week’s games. DirectTV has about 19.2 million subscribers in the United States and about 8.9 million in Latin America. Currently, it is running a promotion that will allow subscribers to get the NFL Sunday Ticket for no extra charge.
The financials look pretty impressive. DTV has a well valued forward P/E of 9.77 and an attractive PEG of 0.64. It doesn’t pay a dividend, but its high growth will make up for that. It has grown earnings annually at 22.93% for the last five years, and it is expected to grow earnings annually at 19.55% for the next five years. If it can meet or beat these expectations, expect DTV's stock to beat the market returns by 8% - 9%.
Your chances of winning that fantasy football contest are pretty slim compared to picking a successful company that rewards shareholders with dividends and above average earnings growth. The recent market downturn is creating sale prices for a lot of high quality stocks. Buying them when there is blood on the street will prove to be a good bet for the long term, looking out 10 to 20 years down the road.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.