Under Armour Inc (UA) vs. Nike Inc (NKE)

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Well, the stage is set. The teams of LeBron James and Stephen Curry, the two best basketball players in the world, are set to square off in the NBA Finals. That represents a corporate standoff, too: Under Armour Inc (UA, UA.C) versus its arch-nemesis Nike Inc (NKE).

Under Armour Inc (UA) vs. Nike Inc (NKE) on Basketball's Biggest Stage

The two players and their style of play couldn’t be more different, despite playing the same game at elite levels. Similarly, UA stock and NKE stock likely appeal to different types of investors, despite both hailing from the apparel industry.

Let’s take a look at UA and NKE and their respective frontmen, and compare them on a few different core metrics.

UA vs. NKE: Up-And-Comer vs. Giant

NKE stock is about as blue chip as they come. Worth upwards of $90 billion, Nike is a member of the Dow Jones, it pays a dividend, and it’s at a very mature stage in its life cycle, with extensive exposure in the most valuable global markets.

Investing in UA stock is less of a sure thing, because Under Armour itself is much smaller, and at a far earlier stage in the company life cycle. The comparison holds when we look at Chef Curry and King James as well:

Size

Nike Revenue (fiscal year 2015): $30.6 billion.

Under Armour Revenue (FY 2015): $3.96 billion

LeBron James: 6′ 8″, 250 lbs.

Stephen Curry: 6′ 3″, 190 lbs.

Age

Nike: 52 (founded 1964)

Under Armour: 20 (founded 1996)

LeBron James: 31 years old (13th year in league)

Stephen Curry: 28 years old (seventh year in league)

Growth

Nike 2015 Revenue Growth: +10.5%

Under Armour 2015 Revenue Growth: +28.5%

While that may clearly spell out the type of revenue growth we’re seeing in NKE and UA, there aren’t the same sort of commonly quoted growth measurements in the NBA game. For that reason, I’ll take a few different measurements: Points per game, as a percentage of career average; percentage growth in points per game from previous year, and Player Efficiency Rating (PER) as a percentage of career average PER.

PPG (% career average): James, 25.3 (93%); Curry, 30.1 (134%)

PPG (% growth from previous year): James +0.0%; Curry +26.5%

PER (% of career avg. PER): James, 27.6 (99.3%); Curry 31.6 (112.5%)

In a nutshell, Curry’s numbers are getting better quickly, and James’s are going nowhere in a hurry. Steph is also doing better than James in absolute terms, as his back-to-back MVP awards might suggest.

UA isn’t close to putting up the sort of absolute numbers that NKE does, but the growth is there. Which gets to the more important point: What are investors paying for that growth?

Cost

Nike: 25.6x P/E, 22.5x forward price-to-earnings ratio.

Under Armour: 70.7x P/E, 48.4x forward P/E.

Golden State Warriors Odds to Win: -200 (bet $200 to win $100)

Cleveland Cavaliers Odds to Win: +200 (bet $100 to win $200)

We can see that UA stock and all that growth is gonna cost you. Similarly, since everyone and their sister is betting the 73-win Warriors team will trump the Cavaliers for the second year straight, that expectation is reflected in the betting markets, which are giving LeBron’s Cavs longshot odds.

In the end, my thoughts on UA and NKE are much the same as they were a year ago, when I concluded:

“While Under Armour may need a decade or more to approach Nike’s annual revenues, it’s gaining ground, and that’s much more exciting to me than the Steady Eddie pace of Nike’s growth. Over the long term, I’m bullish on UA stock, which I expect to penetrate markets Nike entered long ago.”

If you can ride out some short-term volatility, you stand to make some solid long-term dough in UA. Nike likely won’t treat you badly either, but, like Steph Curry, UA will be a lot more fun to watch.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow John on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/under-armour-ua-nike-nke/.

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