(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Under Armour Inc. (UA , UAA) shares have had a terrible 2017, having fallen by nearly 53 percent. What's startling is how expensive the stock still is.

Based on a comparative analysis, shares of Under Armour could be overvalued by as much as 65 percent, making the stock worth only $4.60.

UAA Chart

UAA data by YCharts

Expensive Stock

Despite the massive stock price declines in 2017, Under Armour shares are still too expensive, and trade at a one-year forward earnings multiple of roughly 62.5.

Compare that to Nike's Inc. (NKE) multiple of 23, Lululemon Athletica's Inc.'s (LULU) reading of 25, and Columbia Sportswear's Co. (COLM) multiple of 23.

The unfavorable comparison has to make you question Under Armour's current valuation and wonder why UA isn't trading with a multiple in the low-20's, which is less than Nike's. Should that happen, at 21 times 2018 consensus EPS estimates of only $0.22, Under Armour could be valued at $4.60 a share.

UAA PE Ratio (Forward 1y) Chart

UAA PE Ratio (Forward 1y) data by YCharts

 

Multiples Too High

When using a one-year forward EV/EBITDA multiple, Under Armour shares are overvalued by at least 16 percent, and could be overvalued by as much as 35 percent.

It comes down to where Under Armour should be valued, which is not on par with Nike's 18 times or Columbia's 14 times. But at 13.5 times EV/EBITDA, Under Armour would have an enterprise value of only $4.29 billion, about 36 percent less than its current valuation of $6.8 billion. 

UAA EV to EBITDA (Forward) Chart

UAA EV to EBITDA (Forward) data by YCharts

Estimates Downgrades

It is hard to argue that Under Armour shares aren't expensive. One thing that could change Under Armour's fate is if the company is able to turn itself around and come out of its earnings and revenue slump. To this point, that hasn't happened.

Analysts have been downgrading Under Armour's consensus earnings estimates consistently over the past year, cutting 2018 revenue estimates nearly 31 percent to $5.16 billion, while slashing earnings estimates by almost 74 percent to just $0.22. (See also: Under Armour to Fall Despite Rebrand: Susquehanna.)

 

UAA Revenue Estimates for Next Fiscal Year Chart

UAA Revenue Estimates for Next Fiscal Year data by YCharts

Without a change in the direction of the revenue and earnings trends taking hold, shares of Under Armour are still grossly overvalued on multiple levels, especially compared to its peers.

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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