re: If you had to pick between Under Armor and Nike stocks today?

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* Growth rate. Winner: Under Armour. If there's an allure to Under Armour it comes down to its growth. Last year, Under Armour chalked up a 29% revenue gain and analysts think it will grow another 25% this year, according to S&P Global Market Intelligence. That makes Nike look like it's standing still with 8.2% expected revenue growth in 2016. Investors chasing Under Armour are betting it will be the next $10 billion brand, says Corinna Freedman, analyst at BB&T.

* Valuation. Winner: Nike. Under Armour's fast growth isn't being missed by investors. The stock is trading at almost 70 times its earnings during the past twelve months, which makes the broader market's current 20 P-E look cheap. Nike on the other hand is trading for a much more modest premium of about 25. Some might think Under Armour is worth the higher price for its faster growth. But even if the company achieves lofty expectations for 2017 earnings, the stock is still trading for about 45 times those lofty forecasts. Under Armour's growth is "priced in," says Freedman.


* Stability and durability. Winner: Nike. Even with its stellar growth rate, Under Armour is still tiny compared to Nike. If revenue does hit $5 billion this year at Under Armour, that will still be just 15% of the $33.9 billion revenue expected to be put up by Nike. Nike's sheer size and skill at innovation also makes it a profitability machine. The company's adjusted earnings per share is expected to jump 8.7% this year, not far behind the 11.3% bottom line growth expected at Under Armour. Nike generated $2.1 billion in free cash flow the past 12 months, while Under Armour burned through $370.8 million, Vasilescu says. Nike continues to develop new technology that keeps the brand fresh and preserves profits, says Vasilescu. Its Flyknit cloth technology for shoe uppers, for instance, goes for a premium price but is also less costly to produce since it's a single piece instead of multiple pieces of material that need to be sewn together. On the other hand, Under Armour has more risk, says Paul Swinand, analyst at Morningstar. "They have more things to execute on to continue their growth story," he says. Vasilescu says there have been many Under Armour brands that were supposed to be the "next Nike" but never were.

Wall Street at large likes both Nike and Under Armour, rating both "outperform" and calling for more than 30% upside to the stocks in the next 18 months. But Swinand says for most investors, just go with Nike. "If it was my own money and I had no other consumer names in my portfolio, I’d still prefer Nike, based on that wide moat, its international business, and its returns on capital"

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