Under Armour (NYSE: UA) reported fourth-quarter earnings yesterday, and the crowd went wild.

After announcing sales gains of 36% and a 47% increase in earnings per share, the stock took off on a tear, dashing ahead 11%. It didn't hurt that management boasted that on top of 2010's fantastic performance, it aims to grow revenue another 26% this year. But are there signs that Under Armour might be coming unlaced?

Amid all the hoopla, few investors are worrying about that today. And why should they? The headline numbers look simply terrific, besting the 10% revenue growth and 22% rise in profit that Nike (NYSE: NKE) reported last quarter, Deckers' (Nasdaq: DECK) low-to-mid-20s performance on sales and profit, and even the astounding revival in profit (up 38%) at Timberland (NYSE: TBL). If shoe sales were hot across the board last year, nobody lit the court on fire like Under Armour.

So why am I still raining on UA's parade?

A short's lament
Full disclosure here, right up front: I am short Under Armour by way of put options. And nothing that Under Armour told us yesterday convinces me that I'm wrong to do that. To the contrary, two key numbers still tell me the stock isn't worth what investors are paying for it.

First off, free cash flow: Under GAAP accounting standards, Under Armour earned $68.5 million last year, 46% better than the year before. Good for them. The problem is that free cash flow moved the other way. The $20 million in cash that UA generated last year was less than one-third its net "profit." It was an 80% decline from what UA generated in 2009.

Second, inventories: One reason why cash generation lagged "income" is that, although Under Armour grew its sales 24% last year, grew sales even faster in Q4, and promises to exceed the full-year 2010 growth rate in 2011, its inventories of unsold goods are growing faster than any of those numbers. UA ended 2010 with 45% more unsold goods than it began the year with (accounts receivable also swelled 29%.)

Discussing his company's results on CNBC yesterday , Under Armour CEO Kevin Plank dismissed these quibbles with the comment: "No one ever has inventory figured out, you get better at it. And particularly for us, we're dealing with a much different company today ... than we were just a couple years ago."

I couldn't agree more. Two years ago, Under Armour was cheap, generating 50% more cash from its business, yet selling for a share price less than half what it costs today. Today, Under Armour is overpriced.

Fool contributor Rich Smith is short Under Armour by way of put options. The Motley Fool has a disclosure policy.

Under Armour is a Motley Fool Rule Breakers pick. Nike and Timberland are Motley Fool Stock Advisor choices. Under Armour is a Motley Fool Hidden Gems selection. The Fool owns shares of Timberland and Under Armour.

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