Under Armour has had a bumpy ride the last couple of years. It started shortly after the stock peaked in 2015, which was another year of 20%-plus revenue growth. But in 2016, the sporting-goods chain Sports Authority liquidated, leaving the athletic-wear maker with unpaid invoices. Then in 2017, sales slowed, which created inflated inventories; the inevitable merchandise discounting that ensued hurt margins a lot—trailing Ebitda (earnings before interest, taxes, depreciation, and amortization) margins dropped from 13% to 3%. All this caused the stock to drop 80% from September 2015 to less than $12 a share in November 2017.
The company reacted to the tough times by cutting costs, laying off employees, and paring product offerings. Under Armour (ticker: UAA) made significant management changes, creating new senior executive titles for marketing, product, and innovation. Nearly a year removed from their nadir, the shares, at $18.20, have recovered some of the losses. Revenue growth, albeit modest, has returned, but margins haven’t recovered. Analysts aren’t impressed yet either; only six of the 35 analysts who cover Under Armour rate it a buy. That compares with 21 buys out of 39 analysts covering Nike (NKE).