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Under Armour Dcf

In: Business and Management

Submitted By mjfarmer12
Words 546
Pages 3
Ben Northrop
Investments
Step 3: Company Valuation

Comparables:

Comparables | P/E | P/S | P/B | Stock Price | Under Armour | 71.60 | 5.03 | 11.81 | 70.00 | Jarden | 62.29 | 1.58 | 3.3 | 66.78 | Finish Line | 16.26 | 0.68 | 2.01 | 28.45 |

I have chosen Jarden and Finish Line as companies to compare to Under Armour as the industry average. I believe that these companies will be good choices because they provide similar products in the Athletic Apparel and Shoe industry. As a whole, Under Armour compares very favorable to the rest of the industry. On average, its ratios are approximately five times higher than the ratios of Finish Line and it has more impressive ratios in Jarden as well. This is due to the widespread success of their increased influence in the Outdoor Sporting Apparel.

For this DCF model I used a 5-year growth rate of 14.86%, with a 6% growth rate for the sixth (as was requested). The 14.86 percent growth rate was determined because after researching, according to Guru Focus, most companies’ short term growth rate is between 8.35 and 17.74 percent. I chose 14.86 because I wanted to signify that Under Armour is still growing at a high rate, but did not want to risk overinflating my stock evaluation. To calculate the projected FCF, I took Under Armour’s Free Cash Flow average over the past five years. To find this I took UA’s Cash Flow from Operations and subtracted out its capital expenditures (James Madison University). I then took this number and had it grow yearly by the previously stated growth rate. By doing so I found the intrinsic value per share to equal $5.93 at the end of the six years. This number was found by manipulating the discount rate from 12 to 11%, which I felt was more suiting in comparison to the industry. In general, you want the discount rate used to either be the WACC for the company or use a comparative

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