Over the past five years, this company has tripled its revenue. The stock has done even better, increasing from about $5 to over $50, providing investors with a rare “10-bagger.”

#-ad_banner-#Now, management has pledged to double the $2 billion in annual revenue achieved in 2013 to $4 billion by 2016. As ambitious as this may seem, if any company can pull it off, it’s athletic gear maker Under Armour (NYSE: UA).

Right now, Under Armour is primarily an apparel company. However, management has recognized that increasing market share in athletic footwear is key to growth.

At present, it controls only 2.4% of the U.S. running shoe market — but this sliver of market share accounted for 13% of the company’s revenue last year. In comparison, footwear giant Nike (NYSE: NKE) controlled 59% of the U.S. shoe market but derived 57% of its revenue last year from footwear sales.

Closing the market share gap presents Under Armour with a challenge and opportunity. One key is innovation in lightweight shoe technology. According to a study by researcher NDP Group, sales of lightweight running shoes increased 22% from late 2012 to late 2013. 

Under Armour’s entry in the lightweight niche is its Speedform Apollo running shoes. The shoe weighs just 6.5 ounces, and CEO Kevin Plank said he believes it could be the company’s next “defining product.” 

In addition to targeting increased athletic shoe sales, the company is focusing on women’s and youth apparel. The women’s athletic clothing market is growing as more women wear athletic clothes like yoga pants in casual as well as athletic settings. Product recalls from competitor Lululemon Athletica (Nasdaq: LULU) have helped Under Armour to challenge Lululemon’s dominance in this segment. 

Youth wear is also growing quickly. In the fourth quarter of 2013, the company’s youth apparel sales grew twice as fast as the men’s and women’s apparel segments.

Another growth catalyst for the company is its rapid retail outlet expansion. In 2010, there were 54 Under Armour stores. By 2013, this number more than doubled to 117 stores. By 2016, management plans to have at least 141 Under Armour stores worldwide.

The company is also growing internationally. In 2013, nearly 6% of sales came from outside the U.S. UA recently opened a store in Shanghai and is planning to open outlets in Brazil and the Middle East within the next two years. By 2016, Under Armour anticipates 12% of revenue will be derived internationally.

The stock’s chart is bullish.

In less than 10 months, UA has rallied 90%. Rising off a June low near $28 (adjusted for the April 15 2:1 stock split), shares formed a major uptrend, characterized by rising peaks alternating with periods of consolidation.

After peaking in October, the stock moved sideways until January, establishing support near $37 and resistance around $44. In late January, it blasted through resistance, soaring nearly 30% in one week on much higher-than-average volume. 

The rally continued with UA hitting an all-time (split-adjusted) high of $62.40 in mid-March. Shares have since retreated, presenting a potentially lucrative entry point.

A small shelf of resistance from February can be detected near $55. If UA can break through it, shares should be able to retest the March peak. 

The bullish technical outlook is supported by strong fundamentals.

The company is scheduled to report first-quarter results on April 24. Analysts project revenue will increase 27% year over year to $598.8 million. Earnings are expected to remain flat at $0.04 per share.
For the full 2014 year, analysts expect revenue to rise 23% to $2.9 billion. They anticipate earnings will surge 24% to $0.92 per share from $0.75 per share last year.

Given the bullish technical and fundamental outlook, I plan to go long on this growing athletic apparel company.

Risks to Consider: Conservative traders may want to wait until results are released before taking a position. Another risk is that UA is essentially a play on athletic fashion. While the company’s products are solid, consumer tastes can be fickle. And if UA cannot successfully challenge Nike in the footwear market, revenue and earnings could stall. That said, the company has demonstrated it can successfully execute its strategy over the past five years. 

Action to Take –>
— Buy UA at the market price
— Set stop-loss at $49.98, just below $50 support
— Set initial price target at $62.95 for a potential 19% gain by late summer 

This article originally appeared at ProfitableTrading.com: 
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