Shares of athletic apparel company Under Armour (UAA, Financial) plummeted by 8.91% during the morning session, following the company's update on its FY 2025 restructuring plan.
The update revealed higher projected losses, with EPS guidance falling below Wall Street estimates. Under Armour now anticipates pre-tax restructuring charges of $140-$160 million, primarily due to its decision to exit a California distribution facility by March 2026.
Under Armour (UAA, Financial) closed at $6.795, marking a notable 8.91% decline in its stock price. The market capitalization is currently at $2.88 billion, and the company has an enterprise value of $3.62 billion. The price-to-book (PB) ratio stands at 1.61, indicating a relatively modest valuation compared to the book value of the company. Despite a challenging year with a year-to-date price change of -22.7%, Under Armour is deemed "Modestly Undervalued" according to the GF Value metric, which estimates the stock's fair value at $8.57, positioning it higher than its current trading price.
The company's financial health shows some signs of stress. The Altman Z-Score of 2.24 falls into the grey area, suggesting potential financial challenges, though it remains above the critical threshold of 1.8 that could indicate bankruptcy risk. On the positive side, the Beneish M-Score of -3.12 classifies Under Armour as "unlikely manipulator," alleviating concerns about potential financial misreporting.
The company's recent performance metrics indicate a challenging period with EBITDA growth down by 83.4% year-over-year and revenue per share declining over the past 12 months. The stock has experienced a one-week price change of -17.13% and a six-month decrease of 19.49%. The long-term trends are also not favorable, with a three-year price change of -33.25% and a five-year change of -19.99%.
Under Armour's financial ratios depict a company under pressure, with a debt-to-equity ratio of 0.74 and a cash-to-debt ratio of 0.66. These figures highlight the company's leveraged position and its limited cash reserves relative to its debt obligations. The interest coverage ratio is currently zero, indicating potential difficulties in meeting interest payments solely with operating profits.
Despite these challenges, Under Armour's gross margin remains robust at 46.43%, and the company continues to generate free cash flow, with a TTM free cash flow per share of 0.79. However, its earnings per share (EPS) is in the negative territory at -0.18, reflecting the company's ongoing profitability issues.
Institutional ownership stands at 39.03%, with insider ownership totaling 3.48%. The short percentage of float is relatively high at 11.94%, signaling a significant bearish sentiment among short sellers.
In conclusion, Under Armour (UAA, Financial) faces significant headwinds as highlighted by its recent restructuring announcement and financial metrics. While the stock is currently undervalued according to the GF Value, potential investors should weigh these challenges against the apparent discount in stock price. The restructuring efforts and anticipated cost savings will be crucial in determining whether Under Armour can navigate through its current financial difficulties and return to a growth trajectory.
