Under Armour (NYSE:UAA) has had an incredible year of growth so far, posting revenues up 30% and income up 22% year over year in the most-recent quarter. This was after posting revenue growth in the mid-30% range in Q1 and Q2, following a strong 2013 with full-year revenue up 27%.
But shares of Under Armour are not cheap. They are trading higher than 80 times earnings compared to a much cheaper Nike (NYSE:NKE), which is trading at just 30 times earnings.
Investors who want in on the athletic wear space may be wondering if Under Amour could be the big winner here and continue to post such amazing growth. Here are two ways Under Armour could continue to soar in 2015 and beyond.
1. Becoming a global brand
Under Armour's explosive growth in the last few years has been mainly spurred on by domestic growth. In fact, international sales have only been a fraction of the company's total revenue. However, international sales have steadily started to rise, and in the most recent quarter they grew 94% year over year.
International sales now account for 9% of total net revenues. Under Armour's management plans to continue the company's push to make Under Armour a global brand, and hopes to eventually push international sales to as much as half of UA's total revenue.
Under Armour has made a name for itself outside the U.S. through partnerships with elite professional teams and players, boosting itself in countries and regions including Japan, Europe, Canada, and Latin America. In 2011, Under Armour kicked up the international game, opening its first-ever brand store in China.
The company has reported that it seeks just a modest 12% of its revenue to come from international sales by the end of 2015. However, the company could be on track to grow this number more quickly. One year ago, international sales made up just 6.5% of net revenues. If the company can continue to post around 90% year-over-year growth in its international segment in 2015, it would help to continue driving massive increases in overall revenue for 2015 and years to come.
Nike will continue to be the dominant competitor globally in 2015. It already has more than half of its sales coming from international markets and is all over big international events such as the World Cup and Olympics. Still, Under Armour is well on its way to more international recognition and investors should look for more UA sponsorships at worldwide athletic events in the next few years.
2. Filling big shoes
Another area in which Under Armour is seeing massive growth is the company's footwear segment. In the recent quarter, revenue grew to $122 million, up 50% year over year compared to 32% revenue growth in accessories, and 26% in apparel.
Footwear sales totaled around 13% of Under Armour's net sales last quarter, but like international sales, there's plenty of room for this segment to grow. In fact, Under Armour's management would like to see this segment eventually overtake apparel as UA's largest revenue generator.
Nike reportedly has around 60% share in the U.S. athletic footwear market, and around 25% share of the global market. Under Armour is nowhere near that at just a 2.5% share of the U.S. market, and not enough international sales to make a splash. Yet.
Under Armour has continued to try to move beyond the typical football cleats and basketball shoes that were its biggest sellers in years past, and start to develop on more platforms within the athletic-footwear space. New additions to the company's running shoe line, particularly with this year's launch of the Under Armour SPEEDFORM Series, are helping to put Under Armour on the map. CEO Plank said during the recent quarter's conference call that this new shoe line "may very well be our next defining product."
Catching Nike is not the goal -- high growth is
Under Armour has a long way to go to try and catch up to Nike; but catching Nike's revenue is not the goal... at least not for investors. The goal is for Under Amour to continue posting strong year-over-year growth for the next few years, to notch steadily growing market share, and to shape its own niche in athletic wear, eventually becoming a global brand in and of itself.
Under Amour is going to make strides to doing that in 2015 and beyond with growth in international sales and footwear.
Bradley Seth McNew has no position in any stocks mentioned. 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.