With Yahoo Inc.’s plans to spin-out its remaining shares in Alibaba in doubt, the value of its proposed move could be more than halved by taxes. That’s especially worrisome since the value of Alibaba stock has already devalued the investment.

In January, the Internet pioneer announced plans for a tax-free spin-off of its remaining stake in Chinese ecommerce giant Alibaba Group Holding Ltd [stckqut]BABA[/stckqut] after being pressured by activist investor Starboard Value LP. The big problem was that Yahoo [stckqut]YHOO[/stckqut] did not have the tax-free status approved yet for the spin-out, to be called Aabaco.

The Internal Revenue Service denied Yahoo’s request for a ruling on the tax-free nature of the spin-off, the company disclosed Tuesday, though the agency did not fully rule that Aabaco would be a taxable entity. That leaves the impact unclear for an eventual spin-out, which Yahoo had targeted for the fourth quarter, but it is possible that the company could reconsider the move altogether or move forward in trying to receive approval for the tax-free entity.

Source: Yahoo’s Alibaba spinoff won’t be company’s savior – MarketWatch

Company name Under Armour Inc
Stock ticker UA
Live stock price [stckqut]UA[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Fair
Sales growth Good
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $146.88
Target stock price (averages with growth) $162.27
Target stock price (averages with no growth) $73.59
Target stock price (manual assumptions) $146.41

The following company description is from Google Finance: http://www.google.com/finance?q=ua
Under Armour, Inc. is engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth. The Company’s moisture-wicking fabrications are engineered in a range of designs and styles for wear in nearly every climate to provide an alternative to traditional products. The Company’s operating segments include North America, consisting of the United States and Canada; Europe, the Middle East and Africa (EMEA); Asia-Pacific; Latin America, and MapMyFitness. The Company also offers digital fitness platform licenses and subscriptions, along with digital advertising through its MapMyFitness business. Its apparel offers three gearlines, including HEATGEAR, COLDGEAR and ALLSEASONGEAR. Its footwear offerings include football, baseball, lacrosse, softball and soccer cleats, slides and performance training, running, basketball and outdoor footwear. Its accessories primarily include the sale of headwear, bags and gloves.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in Under Armour Inc.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of Under Armour Inc calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
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In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

  • Stock price at the time of the calculation: $95.02
  • Growth: 0.2
  • Current EPS (TTM): $0.92
  • P/E: 103
  • Future EPS Calc: $2.28
  • Future Stock Price Calc: $235.79
  • Target stock price: $146.4

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I hope that this makes you a Confident Investor.