Under Armour (UA, Financial) has been a terrific growth stock for long-term investors over the years. While the stock’s valuation is a bit steep at 50 times trailing earnings, the stock still has more upside to offer at these levels. I am bullish on the stock primarily because of its potential in the international market.
Throughout the past 10 years, Under Armour has been one of the superior growth stocks. The company has successfully grasped a robust position in its domestic market. As a matter of fact, the company recently shared its 25th successive quarter of at least 20% top-line growth, positioning it to produce approximately $5 billion in yearly sales this year.
For the next five years, analysts anticipated that the company’s extraordinary rate of growth will endure with existing estimates accounting for earnings per share growth of approximately 23% yearly.
One of the most significant things to notice is that the company has successfully made the Under Armour brand popular among customers in international markets as well.
In the most recent quarter, the company’s international sales surged 68% to $150 million. Meanwhile, international sales represent a trivial 15% of entire sales; there is plenty of room left for the company to expand its reach in this division. The company is well positioned to turn international sales into a substantial revenue and earnings driver in the imminent few years.
Nike is the leader in the international market as more than 50% of its overall sales come from outside the U.S. However, in the case of Under Armour, stockholders should expect international sales to escalate swiftly in the rest of 2016.
Apart from this, the company recently detailed its new partnership with Kohl’s. This partnership will permit the company to sell its clothing in Kohl’s department stores. Moreover, the company detailed its plans for selling its basic and casual collection in the stores, the majority of which will be available for women. This will certainly help the company boost sales without affecting its brand image.
Conclusion
Under Armour’s international prospects should continue to drive the stock higher. Although the stock’s valuation is a bit steep, long-term investors can still consider buying the stock due to its international prospects.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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