Nike, Inc. (NKE), Under Armourm Inc. (UA): Which Sporty Clothing Stock Will Outperform?

Under Armour Inc. (NYSE:UA)

Under Armour is to sportswear what Apple is to technology. While the company is known for innovations like fabrics to wick away sweat, or keep you cool when its hot, or hot when its cool, the company’s products are not unique in any way. In fact, the base of its product has been around for decades – Under Armour simply marketed it better.

Under Armour’s value is in the company’s mindshare. It owns the sweat wicking apparel space and has recently entered into more sporting equipment, particularly yoga pants (which it markets as casual wear, much like Lululemon) and basketball shoes in a direct stab at Nike, Inc. (NYSE:NKE). These new markets offer the company the opportunity to grow with a new customer, perhaps stealing marginal share from Lululemon as product shortages leave customers to turn elsewhere. Under Armour Inc. (NYSE:UA) has its casual and yoga attire on store shelves for as little as $24.99, one-fourth the price of Lululemon’s offerings.

Under Armour’s advantage is purely on revenue growth. Consistent margins have left little room for expansion, however the company has grown TTM sales per share from $7 to more than $17 since 2009, a mark of a quality company grabbing more and more share of the total sporting apparel business. The brand has improved operational efficiency, generating more sales with less inventory thanks in part to its growing collection of outlet stores which it uses to turn leftover inventories into year-end cash.

Trading at only 2.7 times sales and with a diversified product mix eating away at new niches, Under Amour looks well positioned to continue its growth story. Investors shouldn’t be so quick to pass on this emerging giant in sporting apparel.

The article Which Sporty Clothing Stock Will Outperform? originally appeared on Fool.com and is written by Jordan Wathen.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.