**Under Armour** (NYSE:** UA**, NYSE:

**), the U.S.-based sports clothing and footwear retailer, posted truly amazing results for its second quarter, ending June 30. This implies that UAA stock could easily rise 86.6% to $46.30 over the next year and a half, assuming its free cash flow (FCF) margins hold up on 2022 sales forecasts.**

__UAA__Keep in mind that UAA stock closed Thursday at $24.81, up 31% from July 19 when it bottomed out at a close of $18.90. So my price target of $46.30 is really more than a double (+145%) from its recent trough.

Even with a slightly more conservative assumption, my minimum target is $34.24, or 38% over Thursday’s close. This article will explain how I came up with this estimate for Under Armour stock.

### Excellent Earnings and FCF Margins

On Aug. 2, Under Armour reported that revenue was up 91% year over year (YOY) to $1.351 billion for Q2. Moreover, its gross margin was 49.5% and adjusted net income was $110 million, representing 8.1% of sales.

But even more importantly, its Q2 FCF exploded to $233.1 million. That can be seen on the *Seeking Alpha* page which shows its quarterly cash flow from operations of $252.8 million, less $19.7 million in capex spending. More importantly, this $252.8 million in FCF represented 17.25% of its $1.351 billion in Q2 revenue.

Therefore, if we assume that by 2022 the company can continue to make 17.3% FCF margins, we can expect a very high FCF number. For example, *Yahoo! Finance*, which uses **Refinitiv** data for analyst estimates, has an average forecast of $5.65 billion for 2022. This is even lower than the *Seeking Alpha* forecast of $2.75 billion for 2022. If we apply a 17.25% margin against the $5.65 billion estimate for 2022 sales, FCF will hit $975 million in 2022. That is almost $1 billion in FCF by next year.

### What Under Armour Stock Is Worth

We can use this to estimate the value of Under Armour stock by the end of 2022. For example, if we use a 5% FCF yield metric, UAA can be seen as having a potential value of $19.492 billion. We derive this by dividing $974.6 million by 5%.

That results in a market cap target of $19.492 billion. This is 86.6% over Thursday evening’s market capitalization of $10.442, according to *Yahoo! Finance*, which I find is the most accurate site for market caps. In other words, UAA stock is worth 86.6% more than that $24.81, making its price target is $46.30 per share.

The bottom line here is that people are back to shopping now and have come out of their lockdown holes. If lockdowns start to come back, this could hurt spending somewhat. But I still think the consumer is back. They are no longer scared like last year.

### Using Lower FCF Margin To Value UAA Stock

Analysts on Wall Street are not as sanguine about UAA stock as I am. For example, TipRanks.com reports that 14 sell-side analysts who’ve written on the stock in the past three months have an average target of $29.23. That represents a potential upside of 16% over today’s price. That is much lower than my target.

Keep in mind that there are a good number of risks with my target price. For example, if we assume that the FCF is 15% lower on average by 2022 at a level of 15% of sales instead of 17.25%, the total FCF forecast will be $848 million, instead of $975 million. Using a 5% FCF yield metric that implies a target value of $16.95 billion, or just 62.2% over today’s price. That lowers the price target to $40.24.

### What to Do With UAA Stock

Moreover, to be even more conservative, let’s assume that it takes 1.5 years for that price to occur (i.e., by the end of 2022). This lowers the annual compound return to 38% annually. The math on that is a little complicated but here is the formula:( (1.622 ^(1/1.5))-1 = 0.38.

Therefore, the target price in one year is $34.24 (i.e., 1.38 x $24.81). That is fairly close to the $29.23 TipRanks price target.

So, by being conservative, using a 15% FCF margin estimate and a 5% FCF yield metric, our best guess is that UAA stock will rise at least 38% by next year. That is a very good prospective ROI for most investors.

*On the date of publication, Mark R. Hake did not hold a position in any security mentioned in this article.* *The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com *Publishing Guidelines*.*

*Mark Hake writes about personal finance on ***mrhake.medium.com*** and runs the ***Total Yield Value Guide***which you can review **here**.*