NIKE, Inc. (NKE) & Under Armour Inc (UA): Stocks for Jocks

In terms of insider transactions the story is a little less rosy. Over the past six months insider sales of Hanes stock have outnumbered insider purchases by a tally of 13 to 1. Not necessarily a reason to dismiss Hanes completely, but investors ought to be wary when insider sales outnumber purchases by such a wide margin. The stock may not be a buy right now.

Because medieval chainmail is so passe

Another stock jocks will undoubtedly root for is Under Armour Inc (NYSE:UA). Of the three, it would be hard to argue that the greatest growth potential doesn’t belong to Under Armour. Take a look at the company’s full year 2012 results and you’ll see it recorded pretax profits of $203.4 million. That represents impressive year-over-year growth of 29.7%.

The company has stated that it expects to grow its operating income, another fairly reliable measure of profitability, at an average around 20% through 2016.  If it can that would mean Under Armour Inc (NYSE:UA) could record an operating profit of $480 million three years from now.

I don’t doubt the ability of Under Armour Inc (NYSE:UA) to continue on a massive growth streak. But even if it manages to grow at a rate that matches management’s projections, in three years, it will be generating EBIT equal to 7.6% of its market cap.

Furthermore the company has increased its shares outstanding by almost 20% over the past 4 years. If that trend continues, the portion of the growth you are entitled to may very well diminish.

Foolish final take

These three American companies all have amazing brands. As the largest athletic company in the world, NIKE, Inc. (NYSE:NKE) is the strongest. Then there’s Hanes, a company that’s way more than just boxer briefs. Last but not least we have Under Armour Inc (NYSE:UA), a relative newcomer on the scene that has grown at astounding rates.

If I were to buy one of these companies today, there are a few traits I’d look for. I would want the company that has the highest margins, sells at the lowest price to book ratio, and has the greatest staying power.  And all those characteristics belong to Nike, and at present price levels I’d say the Greek goddess of victory is your best bet.  Take a look for yourself and see if you agree.

The article Stocks for Jocks originally appeared on Fool.com.

Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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