Under Armour Prepares To Increase Leverage Ratios

It is well known that leverage is good, or at least that's what we think when it comes to managing the finances of a company or even in real estate. The more we use other people's money to increase our wealth the better. However, given the position that Under Armour., Inc. (UA, UAA) is in right now it may be signaling a distressed balance sheet in the near future. 

The company has come from having a somewhat conservative stance when it comes to debt-to-equity ratio in 2013 at a 49.77%, to being aggressive in 2017 at 98.47% , to being desperate in 2018 where it was announced in their 10K filing that "In February 2018, we amended our credit agreement to increase our permitted leverage ratio during certain quarters in 2018".

It is true that in the filing doesn't specify what type of leverage ratio they were talking. Nevertheless, taking a look at the Shareholder's Equity and comparing it with the Current Liabilities and the Total Liabilities we can see that it has changed significantly on both instances.



As you can see by the chart above, Under Armour., Inc. is at a crossroads with their debt. This chart is for the last 5 years, but taking a look back 10 years we can see that this is the first time their total liabilities reach their equity level. Having this with the fact that their revenue is softening may be a dangerous combination in the near future. 




Disclosure: I am/we are short UA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

Post a Comment

Popular posts from this blog

The Fiscal Cliff Won't Stop Facebook From Soaring!

Image
Now that the so-called fiscal cliff is almost a certainty, and fear among investors is growing by the minute, should we run for the exit or should we embrace the pain and see it as a buying opportunity? About a month ago I wrote an article on Facebook (NASDAQ: FB) and listed the reasons why I thought the stock was poised to go higher. Now, after these few weeks I want to add to that article several new pieces of information and make an even stronger point about the stock soaring during 2013. Facebook Gifts. It was introduced as a prototype or beta version right by the time when the latest earnings call was released. Now, we can see it in full mode all over the social site. I find it very useful and as a matter of fact I became a happy customer a couple of days ago. Though it is true that I haven’t seen any of my friends used it so far, I think it’s just a matter of time for it to happen. It truly helps to be able to give a little something to the ones you care even with
Read more

Greed Will Make You Lose!

Image
“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works…” that’s a memorable quote from the controversial Gordon Gekko in the movie Wall Street from 1987. However, that doesn’t apply in real life, or at least not all the time. If you are too greedy looking for profits and don’t pay attention to every aspect of a company you’re investing in, you may end up paying the ultimate price of greed. And that is, losing your money! For those of you, who are investors of Sprint (NYSE: S), and got in somewhere at the beginning of last year (2012), nothing is sweeter than watching your investment almost triple in value. Shares of Sprint were trading on the low range of the $2 mark during January 2012 and have just touched their 52 week highs of $5.97 this Tuesday. Yes, that is a gain of +184% from its 52 week low. But, staying on this boat for 2013 may be too dangerous and greedy if you ask me. Let’s take a look at the reasons th
Read more