Shares of Under Armour (NYSE:UAA)(NYSE:UA) have taken a dive in the past year. This once high-flying stock that the market loved -- that once touted a valuation of over 100 times earnings -- has dropped around 50% since its Q3 earnings were announced last October. 

Still, Under Armour's long-term story could be intact, at least enough so that this growing brand could be a good play now that its stock is trading at a much more palatable 37 times next year's earnings estimates. The company certainly faces many challenges ahead, but after a rough last year, have investors been overlooking Under Armour? 

Under Armour's growth starts to drag

The headline reason for analysts' concern about Under Armour's 2016 performance was a decline in sales growth. The company put up a solid 22% growth over 2015, but that was far below the 28% growth posted in 2015 and below what analysts were expecting. Even more concerning is that Q4 sales were up just 12%, year over year. For full year 2017, Under Armour expects sales growth of 11%-12%. 

An athlete pulls a weight behind him attached to a cord while he runs across turf in Under Armour gear.

Image source: Under Armour.

At its investor day in September 2015, Under Armour said it expects $7.5 billion in sales by 2018, and $800 million in operating income. The company first alerted investors in Q3 that it would no longer meet that income goal because the company would be investing heavily in long-term growth. However, come Q4, the company's slower-than-expected sales growth rate was far more concerning. If Under Armour posts sales growth of 12% in 2017, it would need sales growth of around 40% in 2018 to reach that $7.5 billion goal -- probably unlikely at this point.  

What could drive growth from here

Under Armour is facing some daunting challenges right now -- but its long-term growth story could be intact. The company still only gets a relatively small portion of sales from outside North America. Management still expects international sales to go from 16% of total in 2016 to more than 20% in 2017, as it sees continued success growing its brand in Asia, Europe, and elsewhere. A higher mix of international sales could also give the company's earnings an extra small boost because of the lower effective tax rate in foreign markets. 

Back in the U.S., Under Armour gear started showing up in Kohl's stores in March, and the brand announced that its footwear will be in DSW stores this fall, which could help to grow the company's basics and women's segments, and overall help to diversify its gap in retail, which struggled in the second half of 2016 following the Sports Authority bankruptcy. In addition, Under Armour is focused on growing its direct-to-consumer sales, which make up about 30% of sales now but grew 27% in 2016, year over year. Continued growth in that segment should also help to grow that top and bottom line, as not having the middle retailer keeps margin higher.  

 

Video source: YouTube/Kohl's.

A recent report put Nike (NYSE:NKE) and Adidas (NASDAQOTH:ADDYY) as by far the top-ranked brands for teen consumers and showed a decline in Under Armour's mindshare for that group. Still, the company's deal to be the outfitter for Major League Baseball starting in the 2020 season could be one of the ways the brand regains credibility. It could see similar tailwinds with its brand from its growing clout in college athletics and continued high performance by its top-sponsored figures, such as Steph Curry and Dwayne "The Rock" Johnson. 

Is the stock being overlooked now?

Under Armour has received numerous downgrades already in 2017, helping to push shares lower. Can the stock gain some ground back this year? That remains to be seen, as the market sets new expectations for the stock's realistic growth amid the company's current headwinds.

Right now, the stock's outlook hinges on how well the company can control things such as discounting products, which would drive gross margin and earnings lower, and how well it can capitalize on continued international growth.

In terms of the stock's valuation, recent lowered expectations have pushed the stock price down to less than 1.7 times sales -- which is less than Adidas at 1.83 times sales, and considerably less than Nike at 2.7.

Even though Under Armour is likely to miss its previous 2018 sales goal of $7.5 billion in sales by around $1.5 billion, even getting to $6 billion in annual sales in the next two years (i.e., 12% growth both years) starts to make this stock look much more attractive at its current valuation for those who believe in the company's long-term prospects.  

Seth McNew owns shares of Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool recommends DSW. The Motley Fool has a disclosure policy.