Stock Pitch

COLEMAN FULCHER, ANNA BERGMAN, KELSEY

PELLETIER

Recommendation
We recommend buying Nike versus Under
Armour, due to superior industry positioning,
company strategy, financial health, and a
favorable valuation.

Summary
Industry
Strategy
Accounting
Financial
Valuation

Industry Analysis
Nikes competitive
advantage
Top company that is well
known globally
Differentiates its
products from
substitutes
Established brand
loyalty

Company Strategy - Nike

1. Maintaining an established brand that is recognized globally
Stable growth over a long period of time

2. Providing rapid innovation to consumers

Beating competitors to the market with new products

3. Utilizing the wide production and distribution networks

Use the advantage of economies of scale

4. Creating long-term contracts with celebrities

Ex. Jordan Brand

Company Strategy - Under

Armour
1. Providing a variety in product mix and complementary
products

Products go beyond shoes and working on developing technology called

Connected Fitness

2. Investing in effort to expand

Acquired Endomondo and MyFitness Pal both fitness apps

3. Focusing on growing as fast as possible

Became a major competitor since going public 10 years ago

Accounting Analysis
Adjustments
Differing fiscal years
Capitalizing operating leases for both Under Armour and Nike
After capitalization, Nike still has a more attractive RNOA

Nike

Under Armour

FY2016
Actual

2015 Actual Capitalized

NOA

$2,207.37 $2,924.44

Capitalized

NOPAT

$3,661.60 $3,661.60

NOA

$8,856.00 $12,087.00
$8,450.00 $10,065.00

AVG NOA

1,624.35

1,982.89

Avg NOA

RNOA

15.13%

12.39%

RNOA

43.33%

36.38%

Financial Analysis
NOPAT

Net Operating Assets

1,400.0
1,200.0
1,000.0
800.0
$ (in Millions)

600.0

$ (in Millions)

400.0
200.0
0.0

Year Start
Under Armour NOPAT

Nike NOPAT

10,000.0
9,000.0
8,000.0
7,000.0
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
1,000.0
0.0

Year Start
Under Armour

Nike

Ratio Analysis
Return on Equity

Return on Assets

35.00

20.00
18.00

30.00

16.00

25.00

14.00

20.00

12.00
10.00

15.00

8.00
6.00

10.00

4.00

5.00

2.00

0.00

0.00

Year start
Under Armour

Year Start
Nike

Under Armour

Nike

Ratio Analysis (continued)

Most Recent Quarter

Profit Margin
16.00
14.00
12.00
10.00

Nike

8.00
%

6.00
4.00
2.00

Current Ratio
Interest Coverage Ratio
(earnings)
Debt-to-Equity (earnings)

0.00

Year start
Under Armour

Nike

Under
Armour

Q1 2017
08/31/201 Q3 2016
6
09/30/2016
2.72
2.36
111.45
16.93

24.34
55.83

Financial Analysis Winner: Nike

Stability
Durability

Valuation Analysis

Cash Flow Valuation

Sensitivity Analysis
Biggest drivers are cost of equity and
revenue growth
UAs extreme sensitivity to growth
puts its valuation at risk
Difficulty of valuing growth

Market Based Valuation

Conclusion