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Author: TMFCogitarius Big gold star, 5000 posts Old School Fool Home Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 332  
Subject: Don't worry - be happy? Date: 11/12/2012 9:50 AM
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That's what this author seems to think:
"For a while now, professional investors have worried about inventory levels at Under Armour versus their competition. I've written about the company's inventory levels in the past, as the company was already showing improvement, but this quarter set a new standard. In fact, current quarter inventory represented 54.27% of current quarter sales. In prior quarters, this was a much higher number where inventory sometimes represented more than 100% of quarterly sales. With this improvement, Under Armour is now squarely in line with its peers. Lululemon held 44.36% of inventory to quarterly sales in its most recent results. Nike, which is seen as a category leader, reported 51.15% of inventory to sales in its most recent quarter. The worry that Under Armour will have to markdown unsold inventory, which would hurt profits can now finally be put to rest."
http://beta.fool.com/mhenage/2012/11/11/we-can-finally-put-u...

If the ~17% drop in the stock since September is any indication, Mr. Market disagrees. Justifiably so.

Because, from a cash conversion cycle perspective, they squeezed one metric only to blow out another -- receivables.

On a TTM basis, Days Sales outstanding almost doubled from 29.3 end 2011 to 57.6, while Days inventory was stable at 128.1 vs. 129.6 end 2011. The former raises questions about the quality of sales. The latter does so about the quality of both forecasting and supply chain management.

Net, the Cash conversion cycle ballooned from 114.4 end 2011 to 142.

Now I wonder why the author overlooked that?

"Looking at Under Armour's other financial metrics shows that business is improving. In the last three months, Under Armour reported growth in adjusted operating cash flow of 22.21%. The company also generated over $72 million in free cash flow during the same time frame. Under Armour also reported that its gross margin increased from 48.4% last year, to 48.7% this year. While the stock is not cheap, a lower forward P/E ratio and improved inventory management makes the company a real contender."
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