Under Armour (NYSE:UA) likes to compare itself with Nike (NYSE:NKE). Under Armour makes athletic gear. Nike makes athletic gear. Under Armour has big-name endorsers. Nike has big-name endorsers. Under Armour supports the University of Maryland. Nike supports the University of Oregon. But Under Armour stock isn’t in the same class as Nike stock.
Am I being unfair? Maybe a little. But only a little. Put it this way. Nike has a market cap on March 6 of $134.4 billion. Under Armour’s market cap is $9.3 billion.
One is an investment. The other is a speculation.
Nike Stock Is Superior
Nike earned $1.93 billion last year on revenues of $36.4 billion. That wasn’t even a great year. It paid out 88 cents in dividends last year to 1.24 billion shares and covered that dividend with earnings twice over.
The price to earnings ratio is about 64, because it’s expected to do better this year. It brought in nearly $5 billion in operating cash flow during its last fiscal year and at the end of November had about $4 billion in the bank, including short-term investments.
Nike put the era of founder Phil Knight in the history books long ago. While CEO Mark Parker is approaching retirement, the company has a deep bench behind him, led by CFO and executive vice president Andrew Campion, who is not yet 50.
Yes, one of its shoes exploded with Zion Williamson’s foot in it. Paul George, who likely will be the NBA’s most valuable player this year, has the endorsement deal for the infamous shoe.
Nike has literally hundreds of big-name athletes and athletic teams under endorsement contracts in any sport you care to name. Cricket, anyone? They’ve got India. Rugby? They have the Argentina national team. Australia rules football? The Carlton Blues.
Over the last five years the value of your Nike shares has doubled, and 21 of 33 analysts following the stock say you should buy it. That’s up from 17 three months ago.
Under Armour Stock Doesn’t Compare
Under Armour lost $46 million last year on sales of almost $5.2 billion. Let’s not even talk about a dividend. This stock doesn’t even have a price to earnings ratio. The company had a little over $550 million in the bank in December and had operating cash flow of $628 million. This was considered a pretty good year.
Under Armour is under the absolute control of founder Kevin Plank. I say absolute because in 2016 he “split” the stock, taking the shares with voting control and leaving his shareholders to the rest. If a bus ran over him in Baltimore tomorrow (god forbid) his wife or kids would be in charge. His relationships and corporate culture draw negative attention from the press.
Under Armour is a speculation. Since 2019 started its stock has done better than that of Nike. It’s up 22%. But you’re starting from a much lower base. Over one year, or two years, or five years, Nike has been a much better performer.
The Bottom Line on Nike Stock
Speculators might like Under Armour. The shares are volatile, meaning you can make money on trades and options. Last year saw a one-month spike from $14 to $22 per share in May, and another spike in November from $16 to $20. There was also a December fall from $22 per share to $15.
Nike shares, by contrast, move with the market. You buy it, you put it away, you ignore it. It’s the kind of stock you can give your kids. Under Armour is the kind of stock you give your bookie.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.