The Biggest Brands (and Teams) in Sports Part Two
Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the last part of this article we took a look at three big companies, all of whom have their hand in sports. This second part of the article will continue onwards through the world of sports with a look at Manchester United (NYSE: MANU), Madison Square Garden (NASDAQ: MSG), and Under Armour (NYSE: UA).
The World's Team
Manchester United may not be too popular in the U.S. but they are the world's biggest sports team and they just happen to be traded on the NYSE. Oh, and don't be fooled by soccer's reputation in America, the rest of the world loves it! According to the Manchester United IR page, there was a cumulative audience of over 4 billion viewers to Manchester United games during the 2010/2011 season. Those games were viewed in 211 countries. The average audience per game was 49 million, and most of these were regular season.
All of these viewers add up to more merchandise sales, advertising revenue, more TV revenue. All of that additional cash helps Manchester United acquire the best players and continue to win tournaments and the prize money that comes along with them.
There's no question that running a sports team, and being profitable, is a tough task. Manchester United have the ability to run a profitable team and if the limited amount of data we have so far is anything to go by, they are doing so.
Manchester United has posted two quarters worth of EPS, in June it was 24-cents per share and in September it was 21-cents per share. Estimates for EPS in FY 2013 come in at 41-cents per share and they are expected to grow to 65-cents per share in FY 2014.
Manchester United presents a good buy in the short term, they will win the Premier League and they'll give the Champions League a good run too. If Manchester United wins the Champions League then I'd expect the stock to receive a big pop, presenting a good time to sell. If you want to buy and hold this stock, you have to know that your money is riding on the success of a sports team. It has, however, been a very successful team throughout history.
Teams, Arenas and TV Networks!
Madison Square Garden is a great stock for anyone who loves sports and wants a bit of diversity in their investment. The company owns the New York Knicks and the New York Rangers (who just got their league back) as well as the namesake arena and the TV network that broadcasts all of the Knicks' games and more.
The stock has returned over 60% to investors over the past year, something I bet a lot of people are happy about. A 60% gain is quite a run up though; could it possibly be worth all that over just a year? Let's explore the stock.
The first thing that catches my eye is the incredibly high P/E ratio of 33.9. This stock will likely not have much room to grow into newer markets, the teams will always play to the same markets and the arena is already at the top of its game so I don't see growth being so great as to justify such a high value. The only way it could be valued so highly is if the MSG TV networks were to expand and attract a bigger audience.
Still, despite the massive growth prospects for this company, the analysts like it. The stock has a mean recommendation on 2.00 from seven analysts, three of them giving it a "Strong Buy" rating. The analysts also believe that MSG will have an FY 2014 of $1.69, a 36% gain over FY 2013.
You've probably heard of Under Armour, or at least seen your favorite athlete wearing some while competing. The athletes love it and this brand has made a killing from that. You'll find their skin tight clothing on thousands of athletes around the world, some of it is paid for, but some of it is simply because of the quality of the brand.
The stock has had some great 5 year EPS growth, toting an annualized 18.15%, revenues have grown 23.18% annualized over the last five years. FY 2012 is expected to end at $1.20 per share and analysts believe that the number will jump from $1.20 up to $1.50 during FY 2013.
Under Armour is overpriced currently though. The stock is trading with a P/E of 44 and a price to book ratio of 6.44. Return on assets at the company was 10.3% over the last twelve months, consistent with the 10% average over the last five years. Debt to equity at Under Armour is low, one of the few positives when it comes to looking at price ratios.
The Motley Fool's CAPS scores the stock a 3/5 and analysts are about the same with a mean recommendation of 2.45, right there in the hold zone.
Ash1402 has no position in any stocks mentioned. The Motley Fool recommends Under Armour. The Motley Fool owns shares of Madison Square Garden and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!