Which Is The Better Bet - Nike vs. Under Armour?

Not too long ago we did a “Which Would You Rather…” article about two of the biggest names in the sports apparel business, Nike and Adidas. Since that particular industry is as globally massive as it is, it stands to reason that there are more than just two major players therein. But Nike is unquestionably the worldwide leader on many levels when it comes to sporting goods and apparel, so much so that it has become more or less a household name. Others like Reebok and the aforementioned Adidas have achieved similar acclaim in the market but they, like Nike, have been around for decades. Actually Reebok and Adidas have been around for the better part of the last century with the former having been founded in 1895. But while Nike is the youngest of the three it is also the most successful. So rather than compare apples with apples, we decided to compare one of the oldest with one of the youngest, the latter being Under Armour. So which stock would you rather add to your portfolio, Nike NKE or Under Armour UA?

Founded in 1996, Under Armour has quickly built itself up into quite the contender in the athletic apparel game. The founders have admitted that when they started the company they had their sights set on their primary competitor, Nike. Their goal was not to become a clone or copycat of the long-reigning industry leader and not to achieve its level of success but to surpass it. Fast forward to 2013 where both Nike and Under Armour are blowing the rest of the industry competitors out of the water. Their respective stocks have exceeded the 17% return that the S&P 500 offered and the near and distant future looks bright for both companies. Under Armour has been the underdog since its inception in the mid-1990s but it almost seems as though they have relished that distinction, or at least they have not let it bother them at all. Over the last five years Under Armour has seen its stock nearly quadruple which has put its market cap in the $7 billion range and brought the company into much more competitive market territory.

One of Under Armour’s initial goals was to establish and maintain 20% growth over the long-term and over the last three years the company’s year-over-year revenue has grown by no less than 20% every quarter. Their revenue generated from footwear sales rose more than 40% in the first quarter of 2013 from the previous year and hasn’t slowed down. Nike on the other hand remains the juggernaut it has always been, enjoying a market cap of nearly $60 billion and an enviable net profit margin of just over 9%. Under Armour’s NPM is just over 6%. Nike also has cash and assets in excess of $4 billion with shareholders happily collecting a dividend yield of 1.3%.

So in the end it might be easy to want to choose the proven leader, Nike, as your preferred stock pick and no one would blame you for doing so. But considering Under Armour’s meteoric rise to near the top of the athletic apparel charts and their long-term outlook, choosing between the two may come down to deciding if you want your cake now (with Nike) or later (with Under Armour).