Is Under Armour Inc. a Buy?

A decade's worth of growth for Under Armour (NYSE: UAA)(NYSE: UA) came to an abrupt end in 2016, and the athletic apparel maker has spent the past two years trying to regain its footing. Last year was especially horrible, and while 2018 is unlikely to be a whole lot better, there are signs the clothing company may be back on track.

First quarter revenue was relatively flat in North America. That is Under Armour's biggest market, and still accounts for nearly 75% of total revenue. But international revenue continues to grow at a double-digit pace, and if the apparel maker can get back on the ball here at home, there's a good chance it can return to its former growth.

Fickle fashion faux pas

Under Armour stumbled hard after the changing fashion tastes of consumers saw them buying more sports-oriented athleisure outfits and less actual performance wear. That also hurt rivals like Nike and dragged down Under Armour's biggest retail customer, Dick's Sporting Goods.

Under Armour accounts for a sizable portion of Dick's revenue, where it has typically been second only to Nike, and their reliance upon one another helped cause all three to decline. At the same time, Adidas was taking market share with fashion that was on-trend.

Under Armour is in transition, undergoing major restructuring and spending cuts that will result in as much as $130 million in charges. That could position it for more profitable growth, but it is going to take some time for Under Armour to sort itself out.

The sports apparel company also reported a breach in its MyFitnessPal nutrition and exercise app earlier this year, which affected 150 million user accounts. While the full impact of customers' lawsuits won't be known for some time -- possibly years -- Under Armour's reputation has taken another hit.

There have been several data breaches involving fitness apps this year, most recently by PumpUp, a Canadian company that exposed sensitive consumer health data of 6 million users via an unsecured back-end server hosted on's cloud infrastructure, and by Strava, which posted a heat map showing Fitbit users' workout routines, including those of military personnel on secret bases.

While data breaches seemingly have become commonplace, the cost of data breaches to organizations is on the rise, at least in the U.S. A Ponemon Institute study found the cost of a data breach in the U.S. hit a record $7.35 million last year, with the cost per record in the healthcare field the highest at $380, more than double the global average of $141 per record for all industries.

A world of opportunity

In the first quarter, Under Armour's revenue in Latin America was up 21%; Europe, the Middle East, and Africa jumped 23%; and the Asia-Pacific region soared almost 35% higher. China, in particular, experienced "continued significant momentum," according to president and chief operating officer Patrik Frisk. He said that the company will be adding over 200 retail points of sale there in 2018. China got the largest allocation of Under Armour's new HOVR Connected smart shoe when it launched last quarter, and e-commerce accounts for a larger proportion of sales in China than in any other market.

In the past, Under Armour has referred to China as a "hyper-growth" market, helping to grow the international business to the point that overseas sales now make up about 27% of total revenue.

Although Under Armour's stock has pulled back slightly from its recent highs, shares are up 60% so far in 2018 and have doubled from their 52-week low. Based on analysts' forecasts that the apparel maker will see earnings surge 72% next year, Under Armour's class A stock is trading for almost 75 times forward earnings, with 31% earnings growth predicted over the next five years.

That's a bit rich for a company that admittedly is still figuring out how to recapture its former glory in its home market while driving growth in international markets. Considering how much work it still has to do -- and that next year is when most expect Under Armour to hit the ground running again -- there may be better opportunities ahead to buy into Under Armour.

10 stocks we like better than Under Armour (A Shares)When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Under Armour (A Shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Fitbit, Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.