Under Armour (UAA)

Athletic apparel company Under Armour (NYSE:UAA) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 4.7% year on year to $1.33 billion. Its non-GAAP profit of $0.04 per share was $0.02 above analysts’ consensus estimates.

Company Overview

Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE:UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Under Armour's primary competitors include Nike (NYSE:NKE), Lululemon (NASDAQ:LULU), Columbia Sportswear (NASDAQ:COLM), Adidas (ETR:ADS), and Puma (ETR:PUM).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Under Armour’s 2.3% annualized revenue growth over the last five years was weak. This was below our standards and is a rough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Under Armour’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7.2% annually.

Under Armour also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 7.3% year-on-year declines. Because this number aligns with its normal revenue growth, we can see that Under Armour has properly hedged its foreign currency exposure.

This quarter, Under Armour’s revenue fell by 4.7% year on year to $1.33 billion but beat Wall Street’s estimates by 1.9%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection implies its newer products and services will fuel better top-line performance, it is still below average for the sector.

Under Armour’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same. The company broke even over the last two years, inadequate for a consumer discretionary business. Its large expense base and inefficient cost structure were the main culprits behind this performance.

This quarter, Under Armour generated an operating margin profit margin of 1.3%, down 11.1 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Under Armour’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Under Armour reported adjusted EPS of $0.04, down from $0.30 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Under Armour’s full-year EPS of $0.06 to grow 165%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Under Armour broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Under Armour burned through $90.32 million of cash in Q3, equivalent to a negative 6.8% margin. The company’s cash burn slowed from $367.2 million of lost cash in the same quarter last year.

Over the next year, analysts predict Under Armour’s cash conversion will improve. Their consensus estimates imply its breakeven free cash flow margin for the last 12 months will increase to 5.3%, giving it more money to invest.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Under Armour historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.7%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Under Armour’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Under Armour’s $1.9 billion of debt exceeds the $396 million of cash on its balance sheet. Furthermore, its 8× net-debt-to-EBITDA ratio (based on its EBITDA of $179.5 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Under Armour could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Under Armour can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see Under Armour beat analysts’ EPS expectations this quarter. We were also glad its constant currency revenue outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $4.60 immediately after reporting.

Updated: December 3, 2025 at 10:01 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Under Armour.

Under Armour doesn’t pass our quality test. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its Forecasted free cash flow margin suggests the company will ramp up its investments next year. On top of that, its constant currency sales performance has disappointed.

Under Armour’s P/E ratio based on the next 12 months is 39.7x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $5.87 on the company (compared to the current share price of $4.61).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.