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Under Armour's opportunity for global growth is enormous. Source: Under Armour.

Blue chip stocks are companies that have long dominated their industries, have strong competitive advantages, and are stable long-term investments. While blue chippers may not have a lot of room to grow, they often pay steady dividends, and their reputation or brands usually provide a strong competitive advantage. For investors, that means stability and a relatively "safe" investment. Better to sleep at night. 

However, every blue chip stock was once a young, dynamic upstart, disrupting the competition, and taking market share away before the establishment could even react. While a portfolio with a foundation of blue chips is good, most investors would do well by owning a handful of the next blue chip stocks, too. Let's take a closer look at Under Armour (NYSE:UAA). Does this relative upstart in the athletic apparel and footwear business have what it takes to be a blue chip stock?

Facing off with a titan 
Under Armour's biggest competitor -- Nike (NYSE:NKE) -- is a blue chip stock by almost any definition. Nike has a market capitalization of almost $70 billion, sold $27.8 billion in merchandise last year, and has paid out a dividend -- which it has increased regularly -- for more than 25 years. While the dividend yield today is less than 1.2%, the long-term value of that quarterly payout is undeniable:

NKE Chart

NKE data by YCharts.

The stock price has increased by 21,560% since 1985; but that consistent dividend is worth another 10,000% in returns. Add in that management thinks it can keep growing sales at almost 10% per year for the next several years, and earnings per share at an even higher rate, and Nike is pretty hard to ignore as an investment. It's also a stiff competitor for the upstart Under Armour. 

Why even consider Under Armour against Nike? 
Under Armour's sales during the last year are about the same as Nike's were in 1989:

NKE Revenue (Annual) Chart

NKE Revenue (Annual) data by YCharts.

Frankly, today's Under Armour is a lot like Nike was 25 years ago -- with an interesting twist. 

Michael Jordan

Air Jordans have been a staple of the Nike lineup for an amazing 30 years. Source: Nike

While Nike started as a shoe company, Under Armour started as a clothing maker, developing high-performance athletic apparel specifically designed to enhance athletic performance. During the past few years, the company has moved into the footwear business, as well, and is growing its market share. In 2010, footwear sales were $127 million; by 2013, they had more than doubled to $290 million. Management says that, by 2017, footwear sales will double again to more than $600 million. 

In short, Under Armour is growing its business like wildfire. According to its most recent investor day presentation in late 2013, total sales have grown at a compounded annual rate of 30% since going public. Management is projecting it will reach $4 billion in sales by 2016. It took Nike almost six years to make the jump from $2 billion to $4 billion; Under Armour expects to do it in only three. 

Competitors, but in an expanding market 
A lot of companies have tried to become the next Nike, but none have been able to surpass its global dominance. The beauty of what Under Armour's management is trying to accomplish is that it doesn't require Under Armour to "out-Nike" Nike. The global market that these two -- as well as other competitors like German behemoth Adidas AG OR  (NASDAQOTH:ADDYY) -- compete for, is only getting larger. During the next 20 years, the world's middle class is going to expand by about 1 billion, and it's these new consumers who will fuel the long-term growth in the athletic apparel industry. 

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Under Armour apparel and footwear is very popular with outdoor enthusiasts. Source: Author.

Under Armour also participates in a number of markets in which traditional athletic apparel companies like Nike and Adidas do not -- specifically, hunting, fishing, and other outdoor activities. By expanding its target market a little wider, Under Armour can still utilize its expertise in high-performance apparel effectively, while not getting outside of its core strengths. 

Valuation 
This is where Under Armour can get a little scary. By typical valuation measures like PS, or price to sales, and P/E, or price to earnings, Under Armour shares are at levels that Nike shares may have never seen:

NKE PS Ratio (TTM) Chart

NKE PS Ratio (TTM) data by YCharts.

The thing is, Under Armour is also growing at a rate Nike never reached, either. It's this accelerated growth that Mister Market is paying such a high premium for today. The company has raised revenue and earnings guidance for the year in each of the past two quarters already, based on sales growth in excess of 34%. As long as the company continues to grow at a high clip -- more than three times the growth rate of Nike today -- it will remain a premium stock. 

One way to invest in this "next" blue chip stock
I'm an Under Armour shareholder, but with a relatively small position so far. My investing plan is to build my position over time, based on how the business itself performs.

Could there be speed bumps down the road? I'm sure that during the next 10 or 20 years, there will be times the stock goes way down. However, I'm not willing to miss out on how much it could go up in between those downturns. I'm also willing to buy more shares if the business remains high quality, but the stock falls. 

Could Under Armour turn into one of the next blue chip stocks? I think so. Actually, I'm betting on it.

Jason Hall owns shares of Under Armour. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.