UAA - Valens Credit Report - 2023 06 14
Credit markets are slightly overstating UAA's credit risk with a YTW of 6.109% relative to an Intrinsic YTW of 5.522%, while CDS markets are overstating UAA's credit risk with a CDS of 240bps relative to an Intrinsic CDS of 135bps. Furthermore, Moody's is overstating UAA's fundamental credit risk with its Ba2 credit rating four notches below Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. As positives, most management are material owners of UAA equity relative to their annual compensation indicating they may be aligned with shareholders to pursue long-term value creation for the company. Furthermore, most management members have low change-in-control compensation relative to their annual compensation, indicating management is not incentivized to pursue a takeover or accept a sale of the company, thereby reducing event risk for creditors.
Earnings Call Forensics™ of the firm's Q4 2023 earnings call (05/09/2023) highlights that management is confident they have products at every price point and they're going to have a steady cadence of new products. Furthermore, they're confident in their wholesale partner business and that they're bringing in outside talent for collaborations. Finally, management is confident Q2 is the turning point back to growth and EMEA is the highest growth region.
Under Armour is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. The company provides HEATGEAR?, which is designed to be worn in warm to hot temperatures under equipment or as a single layer; and COLDGEAR?, which is designed to wick moisture from the body while circulating body heat from hot spots to help maintain core body temperature. The company's footwear products include running, basketball, cleated sports, slides, training, and outdoor. The company provides digital fitness subscriptions, along with digital advertising through its MapMyFitness, MyFitnessPal and Endomondo applications.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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