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FIN 320 Final Project Part Two

FIN 320 Final Project Part Two:

Under Armour and Nike

Southern New Hampshire University

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In the attached Excel workbook, a look at Under Armour and Nike can be found. These two companies will be looked at in order to determine which would be a better company to invest in. In the below document, a more in depth financial performance can be found.

Three-Year Returns

The first look at these two companies is in regards to their three-year returns. These returns are based off a random seven-day stock period in order to determine how these two companies compare. Under Armour demonstrated a three-year return of 4.28% under the tab, Under Armour Stock Prices in W2 in cell D44. Based on this three-year return, Under Armour is performing moderately and an investor would see a return on their investment over a period of time. Nike demonstrated a lower three-year return of 2.11% under the tab, Nike Stock Prices in W2 in cell D44. Based on this three-year return, Nike is performing slightly below average compared to its competitor. Both companies are able to see a positive three-year return, however, Under Armour appears to edge out Nike in the end by performing twice as well.

Financial Calculations

When it comes to financial calculations for each company for a three-year period (2013-2015), Under Armour will be looked at first and then Nike will follow. Please note all numbers are in the millions or billions.

When it comes to the current ratio it is 2.65 USD for 2013 under the tab, Under Armour Balance Sheet in W2 in cell O8. The current ratio for 2014 is 3.67 USD under the tab, Under Armour Balance Sheet in W2 in cell N8. Finally, the current ratio for 2015 is 3.13 USD under the tab, Under Armour Balance Sheet in W2 in cell M8.

When it comes to the price-to-earnings ratio it is 92.30 USD for 2013 under the tab, Under Armour Income Statement in W2 in cell P12. The price-to-earnings ratio for 2014 is 57.87 USD under the tab, Under Armour Income Statement in W2 in cell O12. Finally, the price-to-earnings ratio for 2015 is 62.96 USD under the tab, Under Armour Income Statement in W2 in cell N12.

When it comes to the debt-to-equity ratio it is 0.50 USD for 2013 under the tab, Under Armour Balance Sheet in W2 in cell O9. The debt-to-equity ratio for 2014 is 0.55 USD under the tab, Under Armour Balance Sheet in W2 in cell N9. Finally, the debt-to-equity ratio for 2015 is 0.72 USD under the tab, Under Armour Balance Sheet in W2 in cell M9.

When it comes to the return-on-equity ratio it is 15.4% for 2013 under the tab, Under Armour Balance Sheet in W2 in cell O13. The return-on-equity ratio for 2014 is 15.4% under the tab, Under Armour Balance Sheet in W2 in cell N13. Finally, the return-on-equity ratio for 2015 is 13.9% under the tab, Under Armour Balance Sheet in W2 in cell M13.

When it comes to the return on assets ratio it is 0.95 USD for 2013 under the tab, Under Armour Income Statement in W2 in cell P11. The return on assets ratio for 2014 is 1.17 USD under the tab, Under Armour Income Statement in W2 in cell O11. Finally, the return on assets ratio for 2015 is 1.28 USD under the tab, Under Armour Income Statement in W2 in cell N11.

When it comes to the profit margin ratio it is 7.0% for 2013 under the tab, Under Armour Income Statement in W2 in cell P14. The profit margin ratio for 2014 is 6.7% under the tab, Under Armour Income Statement in W2 in cell O14. Finally, the profit margin ratio for 2015 is 5.9% under the tab, Under Armour Income Statement in W2 in cell N14.

When it comes to the free cash flow ratio it is 207,900 USD for 2013 under the tab, Under Armour Cash Flow in W2 in cell Q10. The free cash flow ratio for 2014 is 359,561 USD under the tab, Under Armour Cash Flow in W2 in cell P10. Finally, the free cash flow ratio for 2015 is 254,824 USD under the tab, Under Armour Cash Flow in W2 in cell O10.

When it comes to the current ratio it is 3.44 USD for 2013 under the tab, Nike Balance Sheet in W2 in cell O8. The current ratio for 2014 is 2.72 USD under the tab, Nike Balance Sheet in W2 in cell N8. Finally, the current ratio for 2015 is 2.52 USD under the tab, Nike Balance Sheet in W2 in cell M8.

When it comes to the price-to-earnings ratio it is 4.46 USD for 2013 under the tab, Nike Income Statement in W2 in cell P12. The price-to-earnings ratio for 2014 is 4.97 USD under the tab, Nike Income Statement in W2 in cell O12. Finally, the price-to-earnings ratio for 2015 is 5.32 USD under the tab, Nike Income Statement in W2 in cell N12.

When it comes to the debt-to-equity ratio it is 0.58 USD for 2013 under the tab, Nike Balance Sheet in W2 in cell O9. The debt-to-equity ratio for 2014 is 0.72 USD under the tab, Nike Balance Sheet in W2 in cell N9. Finally, the debt-to-equity ratio for 2015 is 0.70 USD under the tab, Nike Balance Sheet in W2 in cell M9.

When it comes to the return-on-equity ratio it is 22.3% for 2013 under the tab, Nike Balance Sheet in W2 in cell O13. The return-on-equity ratio for 2014 is 24.9% under the tab, Nike Balance Sheet in W2 in cell N13. Finally, the return-on-equity ratio for 2015 is 25.8% under the tab, Nike Balance Sheet in W2 in cell M13.

When it comes to the return on assets ratio it is 13.83 USD for 2013 under the tab, Nike Income Statement in W2 in cell P11. The return on assets ratio for 2014 is 15.48 USD under the tab, Nike Income Statement in W2 in cell O11. Finally, the return on assets ratio for 2015 is 19.10 USD under the tab, Nike Income Statement in W2 in cell N11.

When it comes to the profit margin ratio it is 9.8% for 2013 under the tab, Nike Income Statement in W2 in cell P14. The profit margin ratio for 2014 is 9.7% under the tab, Nike Income Statement in W2 in cell O14. Finally, the profit margin ratio for 2015 is 10.7% under the tab, Nike Income Statement in W2 in cell N14.

When it comes to the free cash flow ratio it is 3,630,000 USD for 2013 under the tab, Nike Cash Flow in W2 in cell Q10. The free cash flow ratio for 2014 is 3,893,000 USD under the tab, Nike Cash Flow in W2 in cell P10. Finally, the free cash flow ratio for 2015 is 5,643,000 USD under the tab, Nike Cash Flow in W2 in cell O10.

Industry Averages

When it comes to the industry averages for both Under Armour and Nike: the current ratio, return on assets ratio and profit margin ratio will be looked at for each company. Please note all numbers are in the millions or billions.

The current industry average for Under Armour in regards to current ratio is 2.92 USD under the tab, Under Armour Balance Sheet in W2 in cell P8.

The current industry average for Nike in regards to current ratio is 3.06 USD under the tab, Nike Balance Sheet in W2 in cell P8.

The current industry average for Under Armour in regards to return on assets ratio is 0.53 USD, which has been diluted, under the tab, Under Armour Income Statement in W2 in cell Q11.

The current industry average for Nike in regards to return on assets ratio is 2.16 USD, which has been diluted, under the tab, Nike Income Statement in W2 in cell Q11.

The current industry average for Under Armour in regards to profit margin ratio is 5.71% under the tab, Under Armour Income Statement in W2 in cell Q14.

The current industry average for Nike in regards to profit margin ratio is 11.84% under the tab, Nike Income Statement in W2 in cell Q14.

When it comes to each company’s overall financial health, based upon the above amounts it could be said each company is in stable to good financial health. Under the current ratio, both Under Armour and Nike are comparable, with Nike being slightly ahead of Under Armour. However, when it comes to the diluted return on assets ratio Nike is doing much better than Under Armour. Finally, when it comes to the profit margins ratio, Nike is once again ahead of Under Armour. Nonetheless, neither company appears to be having financial difficulties which are demonstrated within each of these values.

Performance Over Time

In regards to Under Armour’s performance over time, it has both strengths and weaknesses. The main weakness can be seen in the profit margin ratio, where it has steadily decreased over the three-year period. While it has remained slightly ahead in regards to industry averages, this still can be a weakness for the company. Another slight weakness can be seen in the company’s return on equity ratio, which was able to hold steady between 2013 and 2014. However, between 2014 and 2015, a slight dip can be seen. A final weakness would be the changes seen in the free cash flow ratio between 2014 and 2015, where a significant drop can be noted in the previous financial calculations. Nonetheless, in regards to their return on assets ratio, Under Armour can see a strength as they are able to see a positive increase within the three-year time period. Another strength can be seen price-to-earnings ratio, where they were able to see a small recovery in 2015 from their drastic dip between 2013 and 2014.

In terms of Nike’s performance over time, it too has both strengths and weaknesses. The main weakness is able to be seen in the current ratio, which has seen a steady decline in the three-year period. A second weakness can be seen in terms of the debt-to-equity ratio, which saw a significant increase between 2013 and 2014. While it has decreased by 0.02 between 2014 and 2015, this may not be seen as a significant improvement. In regards to strengths, the free cash flow ratio can be seen as a positive strength due to the steady climb between 2013 to 2015. Another strength can be seen in the return-on-equity ratio, which has also seen an increase over the three-year period.

When both companies are looked at, a main difference can be seen in the free cash flow ratio. When it comes to Under Armour, this can be seen as a weakness. Whereas, for Nike this ratio can be seen as a strength. This could be due to the size difference between the two companies. While both are popular companies, Nike is a strong recognized brand that can be seen in both everyday and professional sports settings on a regular basis. While Under Armour is utilized in the same manner, the name recognition may not be as strong. Nike is also able to see a significantly higher total cash flow amounts from operating activities than Under Armour sees, which could contribute to the difference.

Investment

Based on the ratio amounts, it could be said that both companies are value companies. While both companies are successful, they do not run above-average when compared to the industry averages (Busch Investments, n.d.). Both stocks are also priced on the low end compared to others stocks, which adds to how they compare to the rest of the industry. While they are well known companies, their stocks do not necessarily reflect whether or not they would be a good investment over the long run. Regardless of this, Under Armour would prove to be the better investment of the two. This is due to their performance over time and the strengths and weaknesses that can be seen within the financial calculations. Under Armour also shows a significantly higher three-year return when compared to Nike. Therefore, while stock prices may be considered low when compared to their competitor, they are showing improvement which could make them a good value company to invest in.

References

Busch Investments. (n.d.). Growth Stocks vs. Value Stocks. Retrieved May 21, 2016, from http://www.buschinvestments.com/Growth-Stocks-vs–Value-Stocks.c1022.htm?ContentID=1022

Form 10-K for NIKE INC. (n.d.). Retrieved May 18, 2016, from https://biz.yahoo.com/e/150723/nke10-k.html

Form 10-K for UNDER ARMOUR, INC. (n.d.). Retrieved May 18, 2016, from https://biz.yahoo.com/e/160222/ua10-k.html

NKE Balance Sheet | Nike, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/bs?s=NKE+Balance+Sheet&annual

NKE Historical Prices | Nike, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/hp?s=NKE&a=11&b=2&c=1980&d=04&e=22&f=2013&g=d

NKE Cash Flow | Nike, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/cf?s=NKE+Cash+Flow&annual

NKE Key Statistics| Nike, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/ks?s=NKE+Key+Statistics

NKE Income Statement | Nike, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/is?s=NKE+Income+Statement&annual

UA Balance Sheet | Under Armour, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/bs?s=UA Balance Sheet

UA Cash Flow | Under Armour, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/cf?s=UA Cash Flow

UA Historical Prices | Under Armour, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/hp?s=UA&a=10&b=18&c=2005&d=04&e=21&f=2013&g=d

UA Key Statistics | Under Armour, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/ks?s=UA+Key+Statistics

UA Income Statement | Under Armour, Inc. Class A Comm Stock – Yahoo! Finance. (n.d.). Retrieved May 18, 2016, from http://finance.yahoo.com/q/is?s=UA Income Statement

 
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