TO: Christopher Thacker, Managing Partner of Towson Cornerstone Group LLC.

FROM: Ariadne Presti, Towson Cornerstone Group LLC. Junior Analyst

DATE: July 6, 2014

SUBJECT: Comparing Financial Strength of Under Armour Versus Nike

Under Armour Inc. is one of the leading apparel companies in its industry.
Founded in 1996 by a former University of Maryland Football player, this
company has made its way to the top quicker than most companies in this day
and age. Research and data about Under Armour has allowed the analysis of
their financial situation regarding periodic stock prices, liquidity of assets,
performance ratios, growth, and profitability along with the comparison of such to
Nike Inc., a worldwide leader in the industry. The analysis and comparison of
both companies allows us to explore every action and reaction each company
has taken or must take given their financial standings.

Why Compare Under Armour Inc. to Nike Inc.?

One may claim that Nike Inc. is an unfair comparison for Under Armour Inc. due
to Nikes global impact on the market. Nike is a well-established company and
has been since 1964. Nike has had 50 years to grow as a company, learn about
the market and adjust their strategies accordingly. Henceforth, Nike has also had
time to adjust their financial situation to the demand in the market and learn how
to budget their assets over the years. During this past year, Under Armour and
Nike had similar quick ratios, but broadly varying net income. Comparing these
two companies would allow us to see why such conditions were occurring. Nike
is also one of Under Armours top competitors in the market; thus, seeing Under
Armours financial progress against Nikes gives Under Armour a chance to see
what they are doing right, and if Nike ends up succeeding in an area where
Under Armour does not, then Under Armour can adjust to said circumstances.
Comparing Under Armour Inc. to Nike Inc. gives our client the largest opportunity
for long-term success.

How Does Under Armour Inc. Compare to Nike Inc.?

Under Armour Inc Nike Inc.
Stock Prices (-1 Yr.) $30.61 $63.72
Stock Prices (-6 Mo.) $43.31 $77.43
Stock Prices (Intra-Day) $60.25 $78.45
Quick Ratio 1.3 to date 1.94 to date
P/E Ratio 78.45 Trailing 12 Months 26.78 Trailing 12 Months
Net Income $13.5 Million $780 Million
Dates of Net Income Fiscal Q1 Ending 03/31/2014 Fiscal Q1 Ending 08/31/2013
EPS $0.77 Trailing 12 Months $2.93 Trailing 12 Months
Data gathered from Standard & Poors, Yahoo Finance and Lexis Nexis
The gathered data in the chart above allows us to see the growth of each
company within the past year. From the first three rows, we notice that Under
Armours stock prices have doubled within the past year, where Nikes have
increased only slightly, staying mainly constant within the measured period. This
results in the earnings per share ratio (EPS), allowing us to evaluate how much
money each company is making per share sold of the company. The variation in
these stock prices has a great deal to do with the companies P/E ratio,
represented from the trailing twelve months. The P/E ratio is the share price
compared to the earnings per share, so a high P/E ratio would mean that there is
a high share price and high growth rate in the company. The quick ratio gathered
for the two companies is the measure of the companys ability to meet its short-
term obligations with its liquid assets. Quaintly said, it measures the dollar
amount available for each dollar of current liabilities. From this ratio we can see
how easily each company will be able to pay off its liabilities. We can also see
the net income for the fiscal first quarter of the 2014 year, ending on March 31,
2014 for Under Armour and August 31, 2013 for Nike.

How Strong of a Financial Position does Under Armour Have?

Financially, Under Armour is not in a bad position. Their increase in stock prices
does show us that they are growing steadily, being that they doubled their stock
prices within the past year. This might also lead us to assume that their stock
prices could fall just as easily as they have risen. Comparing Under Armour to
Nike, we can see that Nikes stock prices have remained relatively consistent,
showing that they are in very steady financial standings. A company that is firmly
accomplished in the market will start paying dividends to its stockholders in
recognition of its steady financial standings. Compared to Nike, Under Armour
has a lower quick ratio. While Under Armours quick ratio is lower than Nikes is,
the 1.3 ratio to date does not show us that Under Armour is unable to pay back
debts, this shows us that Under Armour is prone to pay off their liabilities slower
than Nike might. That being said, Under Armour and Nikes ratios are not that far
apart, leaving both companies relatively equal in this aspect. Their highly varying
P/E ratios, however, show that there is a major difference between the two
companies. For the nature of the apparel industry, a 78.45 P/E ratio is
reasonably high. This is typical for a high growth company. What this shows us is
that Under Armour is still growing at a high rate, which comes with high levels of
change. From a buyers perspective, this is not always a good thing. We can see
the effects of these changes in the companies net incomes. Under Armours
lower net income in the first quarter of 2014 of $13,500,000 clearly depicts why
Nike is such a strong leader in the market with a net income of $780,000,000
during the same first quarter. Higher net incomes can allow for less change,
higher customer satisfaction, and the paying off of dividends and liabilities. A
slight glimpse of these effects is shown in the companies earnings per share,
where we can see how much money each company is truly making off each
share they sell. We can see why Under Armour has a lower net income than Nike
does in its $0.77 earning on each share compared to Nikes $2.93 earning on
each of their shares. Overall, Under Armour is in good standing for what
relatively new of a company it is. If the growth of the company continues as it has
been this past year, Under Armour will succeed in high ways such as Nike is
currently.

What Are the Most Important Points to Look At?

The most important aspects to look at between the two companies are stock
prices and P/E ratios. These two key points give clear-cut images of how well the
company is doing. You can tell if the company is still growing, stable, able to pay
dividends in the near future, how trustworthy it is to invest in the company, and
how worthy it is of your time to pay the stock price before it makes a drastic
change. Comparing these two aspects benefits us greatly because of their
outstanding variance. While the other three aspects do vary, there is not a
significant enough variation to convince an investor one way or another.

Through the comparison of Under Armour and Nike, and evaluating the variance
in stock prices over the past year, six months and intra-day, quick ratios, P/E
ratios, net income and earnings per share, we were able to weigh the value of
growth, profitability, liquidity, and performance of each company. By sifting
through this data and analyzing the P/E ratios and changing stock prices, we will
be able to effectively make an accurate recommendation on Under Armours
financial standpoint.