Critical Comparison: Macy’s, Inc. (M) vs. Under Armour, Inc. (UAA)

Macy’s, Inc. (NYSE:M) shares are up more than 14.09% this year and recently increased 1.70% or $0.48 to settle at $28.74. Under Armour, Inc. (NYSE:UAA), on the other hand, is up 14.00% year to date as of 04/16/2018. It currently trades at $16.45 and has returned -1.14% during the past week.

Macy’s, Inc. (NYSE:M) and Under Armour, Inc. (NYSE:UAA) are the two most active stocks in the Department Stores industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.


Companies that can consistently grow earnings at a high compound rate usually have the greatest potential to create value for shareholders in the long-run. Analysts expect M to grow earnings at a 18.64% annual rate over the next 5 years. Comparatively, UAA is expected to grow at a 28.80% annual rate. All else equal, UAA’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Macy’s, Inc. (M) has an EBITDA margin of 11.35%. This suggests that M underlying business is more profitable M’s ROI is 11.00% while UAA has a ROI of 1.00%. The interpretation is that M’s business generates a higher return on investment than UAA’s.

Cash Flow

The amount of free cash flow available to investors is ultimately what determines the value of a stock. M’s free cash flow (“FCF”) per share for the trailing twelve months was +4.27. Comparatively, UAA’s free cash flow per share was +0.47. On a percent-of-sales basis, M’s free cash flow was 5.24% while UAA converted 4.17% of its revenues into cash flow. This means that, for a given level of sales, M is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios provide insight into the financial health of a company, and allow investors to determine the likelihood that the company will be able to continue operating as a going concern. M has a current ratio of 1.50 compared to 2.20 for UAA. This means that UAA can more easily cover its most immediate liabilities over the next twelve months. M’s debt-to-equity ratio is 1.04 versus a D/E of 0.45 for UAA. M is therefore the more solvent of the two companies, and has lower financial risk.


M trades at a forward P/E of 8.91, a P/B of 1.55, and a P/S of 0.36, compared to a forward P/E of 57.32, a P/B of 3.60, and a P/S of 1.42 for UAA. M is the cheaper of the two stocks on an earnings, book value and sales basis. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. M is currently priced at a -2.81% to its one-year price target of 29.57. Comparatively, UAA is 15.2% relative to its price target of 14.28. This suggests that M is the better investment over the next year.

Risk and Volatility

No discussion on value is complete without taking into account risk. Analysts use a stock’s beta, which measures the volatility of a stock compared to the overall market, to measure systematic risk. A stock with a beta above 1 is more volatile than the market. Conversely, a beta below 1 implies a below average level of risk. M has a beta of 0.75 and UAA’s beta is -0.25. UAA’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. M has a short ratio of 4.63 compared to a short interest of 9.57 for UAA. This implies that the market is currently less bearish on the outlook for M.


Macy’s, Inc. (NYSE:M) beats Under Armour, Inc. (NYSE:UAA) on a total of 10 of the 14 factors compared between the two stocks. M is more profitable, generates a higher return on investment, has higher cash flow per share and has a higher cash conversion rate. In terms of valuation, M is the cheaper of the two stocks on an earnings, book value and sales basis, M is more undervalued relative to its price target. Finally, M has better sentiment signals based on short interest.

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