Four sportswear stocks that may be a good fit for your portfolio

 VF Corporation (VFC) is an international apparel company that designs and manufactures sportswear, outdoor and action sports, jeanswear and imagewear. The company owns leading lifestyle brands such as The North Face, Timberland, Vans, Lee and Wrangler.

The company is poised to take advantage of the fast-growing US$25 billion outdoor and action sports market, where The North Face is already a leader, according to a Morningstar report. This category, the report added, will be a key growth driver for VF.

Morningstar equity analyst Bridget Weishaar expects VF to leverage "its large global supply chain to support additional international sales" that could "grow from 38% of revenue to just under 45% of sales in five years."

The company, whose stock is currently rated 5-stars, has built a strong competitive advantage, or wide moat, given its pricing power garnered through intangible brand assets. "Management's ability to cull declining brands, nurture growing brands and acquire strong brands will continue to support" a portfolio of worthy names that lend the brand a competitive edge, added Weishaar, who puts the stock's fair value at US$82.

Led by the Asia-Pacific region, VF can increase revenue and operating income at a compound annual growth rate of 9% and 11%, respectively, she added.

 Nike Inc. (NKE) is the world's largest athletic apparel and footwear company. The company, whose ubiquitous swoosh logo can be seen on the streets and at major sporting events globally, sells to more than 50,000 retailers through a network of more than 850 company-owned stores, independent distributors and subsidiaries in 170 countries.

"Although the firm develops products across a wide range of price points, its competency in higher-end performance footwear and apparel is unmatched," said a Morningstar equity report that assigned the sports company a wide moat rating, or sustainable competitive advantage. "The firm's tremendous marketing resources, brand image, coupled with endorsements from widely recognized athletes, add long-term credibility to Nike's many innovations."

Morningstar equity analyst Paul Swinand, who recently raised the stock's fair value to US$55 from US$53, said international expansion will be the firm's primary growth driver, especially in China where it's already a leader. "Nike is a way to play emerging-market growth around the globe, as other middle-class consumers develop consumption habits around increasing participation in sports," he said.

Morningstar forecasts average operating margin growth of 19% and projects revenue to grow from US$32.7 billion in 2016 to $52 billion in 2020.

 Dick's Sporting Goods, Inc. (DKS) is a U.S.-based retailer that operates 645 namesake stores in 46 states, offering athletic apparel, sporting goods and footwear.

Although the retailer carries products across activity levels and price points, it's particularly focused on highly profitable higher-performance goods, said a Morningstar equity report, noting the firm is also pushing for a greater geographic footprint that will likely drive its future growth.

The company's management identified the potential for approximately 1,000 stores in the United States before nearing saturation, implying a 35% growth in its store base. Swinand assigns a US$58 fair value estimate to the stock, making it "the most undervalued" in the sporting goods segment.

The firm has a stellar acquisitions record. Its 2007 purchase of Golf Galaxy was "a complete win," making the Dick's the leader in the golf business, asserted Swinand while hinting at the possibility of similar deals in the future.

Morningstar projects the firm's operating margins will average around 9% during its 10-year forecast period. It's assumed that store openings will grow to around 45 per year, leading to a store count of nearly 1,000 by the end of the forecast period; this represents mid- to high-single-digit total average annual revenue growth, said Swinand.

 Ralph Lauren Corporation (RL) designs, markets and distributes a wide range of apparel and accessories. Although the firm isn't a pure athletics clothes play, it has a popular sportswear line comprising golf and tennis apparel.

The label and its distinctive style have created an aspirational value for consumers, both domestically and abroad, which has helped the company dominate a competitive marketplace, according to a Morningstar report.

The five-star-rated company charges premium prices for its products, allowing it to steadily increase gross margins from more than 50% to near 60% currently, said Swinand.

"The company has developed a long record of top-line growth and profits over the years through a combination of internal growth and acquisitions," he added. "Ralph Lauren has delivered consistent midteens or higher returns on invested capital."

As indicated by the recent worldwide launch of Polo Sport, the firm is seeking growth by expanding its global footprint. "Revenue outside North America has increased faster than at home over the past five years," said Swinand, who put the stock's worth at US$163, implying enterprise value/EBITDA of 10.6 times, and free cash flow yield of just around 4.4%.

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