Manchester United (MANU, Financial) is considered by many in the world of football (or soccer as its known here only in the United States) to be the most valuable club in the world and the second most valuable sports team behind the Dallas Cowboys.
Source: Forbes
The company's market capitalization is currently $2.84 billion. It generated a net loss of $53 million on $222 million in pre-tax profit from $788 million in sales during the last twelve months. United also has $327 million in cash and $653 million in total debt. Of course, this is not the best way to value one of the world's most recognized organizations. Truth is, even the $4.1 billion value is too low for the kind of brand power Manchester United commands. Plus, now that "soccer" is making major inroads into the United States media outlets, giving yanks like me the opportunity to watch every weekend morning, United is only gaining value.
The club was formed in 1878 as Newton Heath LYR Football Club, the team for Lancashire and Yorkshire Railway depot in Newton Heath, UK. The club split from the railway company in 1892 and remained under private ownership for almost 100 years, changing its name to Manchester United after being saved from bankruptcy in 1902. United originally went public in 1990, but was taken private by Malcom Glazer in 2005 at a price of roughly $1.5 billion, later re-listing the club on the New York Stock Exchange in 2012. This has given fans the opportunity to own shares, which is something that investors should want to do right now.
Sports teams are historically good investments, because the leagues in which each participates is constrained, thus making it hard to buy one. In fact, there is no way for investors to directly own a US based sports club. If you buy Liberty Media Corp, you will own a piece of the Atlanta Braves. If you buy Madison Square Garden stock, you'll own some of the New York Rangers and Knicks. Rogers Communications would get you a piece of the Toronto Maple Leafs, Raptors, and Blue Jays, but none of those have the history or winning record that Manchester United does.
Granted, since hiring José Mourinho as manager, the club has struggled to get to the top of its domestic league or the Euro Champions League. However, it still has a roster valued at north of $1 billion dollars, giving it leverage to make deals, and the club has young stars with contracts extending past 2020.
The winning ways will return one way or another. Until they do, it's time to buy the stock while the company's market value does not accurately represent the club's value to the market. In the next decade and beyond, athletes will get paid even more, corporate sponsorship deals will get even larger, apparel sales will grow, and Manchester United States will become a lot more valuable. It's inevitable.
Disclosure: I am long MANU.
