On a recent weekend, I got to play the role of supportive husband and cheerleader as my wife competed in an all-female endurance event. She and about 600 other women swam one-third of a mile, biked for 12 miles, and ran for 3 miles on what turned out to be a pleasant eastern Washington morning, despite the early morning chill and drizzle.

While I waited at the finish line for my wife to complete her strenuous journey, I began thinking about the sports industry, and specifically, sports apparel. As an avid sports fan, and as an investor always on the lookout for opportunities, I started doing some digging.

In my search, I came across Under Armour (NYSE:UAA), a company that I have not spent much time on in a while. I was interested to see the share price around $90. Several years ago, a colleague recommended I buy stock in the sports apparel and activewear maker, which I unfortunately did not do. (That was back in 2006, when the share price was still in the single digits!) I'm not one to linger for too long on missed opportunities, but this one seemed to ask for a little more of my attention.

Under Armour has made a serious name for itself in the sportswear arena. Just this year, three of the professional athletes it has endorsement deals with won major titles in their respective disciplines: Tom Brady and the New England Patriots won the NFL Super Bowl, Stephen Curry and the Golden State Warriors won the NBA Finals, and Jordan Spieth won the PGA 2015 Masters and the 2015 US Open. There are also other big names in the stable, like Lindsey Vonn and Michael Phelps.

Under Armour has also muscled out Adidas tobe the second-largest sports apparel and accessories company, making it Nike's (NYSE:NKE) single-largest competitor. I believe there's still plenty of room for Under Armour to expand.

Size matters
As of this writing, Under Armour's total market capitalization is $19.15 billion, putting it squarely into the large-cap company category. Large companies might not always be the first place to look for high-growth-potential stories, but Under Armour is just a fraction of the size of Nike, which currently sits at $96.58 billion in market cap. Global sportswear sales for 2014 were about $150 billion, with Under Armour accounting for about $3 billion of that number.

Using these numbers as a simple measure, it's clear that Under Armour has much room to continue to expand in the world of sports. Representing only 2% of global sales and only a fraction of the size of behemoth Nike, I expect it to continue to successfully attack the market for high-end and high-performance activewear. The company and founder Kevin Plank have been forthright in outlining plans to continue growth by focusing on performance gear for women, expanding in footwear sales (which it rolled out in 2006), and continuing to bid for big-name athlete endorsements, a strategy that rival Nike continues to use heavily.

Digitalizing health and fitness
Under Armour is also striving to be at the forefront of the mobile health movement, announcing in February the creation of the "world's largest digital health and fitness community." Through the strategic purchases of Endomondo and MyFitnessPal in 2014, the company has created an online community approaching 150 million users of its UA Record application. To build on that platform, Under Armour announced a strategic partnership with smartphone maker HTC to make a wearable device that will tie into the UA Record app.

While it remains to be seen how Under Armour will capitalize on its large community of active techies and its foray into wristband technology, the company has stated its intention to be at the cutting edge of where fitness and technology intersect. With wearable health and fitness tracker sales on pace to exceed 20 million units sold this year, and wearable device sales expected to double in the next three years, Under Armour is positioning itself as a leader in this emerging industry.

Riding past momentum
Under Armour has managed to generate impressive growth during the past five years. Earnings-per-share growth has averaged 32.8% in each of the past five years, and average sales growth has been 29.2%. The consensus five-year forward estimate for earnings growth comes in at more than 23%. Analysts certainly expect the company to ride its momentum going forward and continue to increase in size.

To see if the company is able to support these lofty expectations, here's a quick look at some basic financials:


Under Armour


Quick ratio



Current ratio



Total debt to equity



Return on equity



Data: Reuters.

Based on these numbers, short- and long-term debt is certainly not an issue, as measured by the quick and current ratios. The company has ample liquidity for the long term as measured by the total debt-to-equity ratio, a key measure for a business in growth mode. One area that could use improvement, and that could drive further growth and profitability, is the company's return on equity, which lags behind the industry. Despite the strong run Under Armour has had, there's still ample room for improvement in efficient use of its assets.

Under Armour is a solid long-term investment. With a strong business model, growth momentum, and the cash to foster further expansion, its prospects appear to be solid.

One point of concern, however, is current valuation. The company's price-to-earnings ratio sits at nearly 95, and the forward price-to-earnings ratio is still a pricey 62. I would expect there to be some short-term weakness to allow earnings to catch up with current share prices. That being said, I think investors could expect to be rewarded by the sports gear brand during the long term.