Outperforming Nike (NKE) isn’t easy. But Under Armour (UA) stock has far outrun the sportswear giant by offering technologically advanced performance apparel and other goods. Founded in 1995, Under Armour dominates compression apparel, which helps dissipate sweat. The market is $1.2 billion and growing rapidly. Originally, Under Armour founder and CEO Kevin Plank peddled this sportswear to athletes and sports enthusiasts. Now the company commands 70 percent of the niche.
Market dominance helps Under Armour flex its financial muscles. Second quarter revenues surged 42 percent to $291.3 million versus $204.8 million a year ago. Profits rocketed up 77 percent. Under Armour’s compounded annual growth rate for the five years through 2010 was a stunning 31 percent. Sporting goods are more recession-resistant than other discretionary consumer products, according to S&P analysts.
Despite commanding a powerful niche, Under Armour isn’t resting on its laurels. The company expects to double revenues to $2.1 billion by the end of 2013. Last year, it sold $1.064 billion. The strategy is to expand beyond apparel into footwear and sports equipment, along with women’s yoga pants and sports bras.
More growth ahead
Under Armour’s only drawback is its high price-earnings ratio of 48. Of the 23 analysts followed by Thomson/First Call, six have strong buy recommendations and one has a buy, with 13 holds and three underperforms.
S&P analysts rate Under Armour a strong buy, too, citing its multiple new product launches and expanded distribution. The sales growth target for the apparel maker is 35 percent in 2011. The company reports next in late October.
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