If you've been waiting for a better price before making an investment in Under Armour (NYSE:UA) (NYSE:UAA), your patience has delivered stunning results. The sports apparel specialist's stock recently dropped to below $18 per share, a level investors haven't seen since 2009.

There are some good reasons for that collapsing share price, though, and so it might not represent a slam-dunk opportunity to participate in a business rebound. 

A player has his layup contested in a pickup game of basketball.

Image source: Getty Images.

Operating slump

Under Armour's market-thumping momentum has come to a dramatic halt over the last six quarters or so. The retailer was one of the S&P 500's fastest-growing businesses as recently as 2015, logging consistent quarterly sales expansions of 20% or better. 

Management, and investors, had expected that pace to continue. But instead, revenue gains were sliced in half. Under Armour last posted a 9% sales increase as the company lowered its 2017 outlook to just 10%. 

UA Revenue (Quarterly YoY Growth) Chart

UA Revenue (Quarterly Year-Over-Year Growth) data by YCharts.

The earnings picture doesn't look any brighter. Price cuts have pushed profitability down even as the company escalates spending on long-term growth initiatives like international expansion and e-commerce. These trends combined to impair Under Armour's earning power. CEO Kevin Plank and his team are now projecting operating income of just $290 million this year, down from $417 million in 2016. 

Competitive dynamics

The sales and profit slumps are mainly the result of unfavorable market shifts in the U.S. sports apparel industry. Customer traffic is shifting away from the specialty retailers that Under Armour relies on to move most of its merchandise. The change has been industrywide, hurting rival Nike (NYSE:NKE), too. That's a big reason why the footwear and apparel giant's stock has underperformed the market over the last year. 

However, Nike gets far more of its business from outside the United States, and so its operations are better protected against the disruption. In fact, Nike is forecasting steady sales and profit gains for its current fiscal year.

Under Armour's rebound plan parallels that of its larger rival. Like Nike, the company plans to attack the international markets that are showing stronger demand growth trends today. Under Armour also plans to double down on the profitable e-commerce sales channel while improving its innovation process so that its products can once again command premium prices on retailing shelves.

Why wait and see

Those strategies involve two characteristics that investors typically go to great lengths to avoid: They're risky and expensive. As a result, buying Under Armour stock today requires that you balance the certainty of falling profits at least through 2017 against the potential for a sales and earnings rebound down the line.

As management's sales outlook ticks lower, there's not much evidence of the business rebounding or even stabilizing heading into the critical holiday shopping quarter. And while Under Armour's international segments are booming -- up 57% last quarter -- its overall results are still highly dependent on the fragile U.S. market.

That situation, in my view, means investors are better off watching this stock from the sidelines, at least until the picture clears up around its multipronged rebound strategy. Sure, waiting for certainty will likely mean starting your investment at a higher stock price. But it will also protect you from a further collapse, should Under Armour's 2017 holiday performance share similarities with last year's brutal result.


Demitrios Kalogeropoulos 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 has a disclosure policy.