The Upside to Under Armour

09/08/2014 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout stock is a company that produces performance apparel, footwear, and accessories; with sales of $2.7 billion, its products are worn by athletes at all levels, from youth to professional, explains Leo Fasciocco, editor of Ticker Tape Digest.

Revenues at Under Armour (UA) are generated primarily from the wholesale distribution of its products to national, regional, independent, and specialty retailers. Its products are offered in over 20,000 retail stores worldwide.

Most of its products are sold in North America. The company’s trademarks include Under Armour, Heatgear, Coldgear, Allseasongear, and the Under Armour UA Logo.

The stock has been a market leader; it has pushed to the top of a seven week base and now is in good position to breakout at any time. With good earnings coming, we see UA in a good spot to be accumulated in anticipation of a breakout.

UA's long-term chart shows the stock coming public in late 2005 and trading around $5 (adjusted for two 2-for-1 stock splits). It then climbed to a peak of $18 in 2007, the top in the prior bull market.

The stock was then dragged lower during the bear market, sinking to $3 in 2009. It has since rallied strongly over the past five years making a giant move to an all-time high 71.79.

This year, analysts are forecasting a 25% jump in earnings to 94 cents a share from 75 cents a year ago. The stock sells with a price-earnings ratio of 74. That is high. So, the stock is most suitable for aggressive investors.

Going out to 2015, Wall Street looks for a 25% gain in net to $1.20 a share from the anticipated 94 cents this year. Quarterly earnings growth will show acceleration. That is very bullish.

We suggest accumulation of a partial stake in UA with further buying to be done on a breakout over $71.40. We are then targeting UA for a run to $85 after a breakout. A protective stop can be placed near $66.

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