(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Under Armour Inc. (UAA, UA) shares have fallen on tough times recently. The stock has fallen by roughly 30 percent so far in 2017, versus an S&P 500 that is up nearly 10.5 percent. The company sports a high valuation, which comes in the face of slowing revenue growth. Under Armour will have to prove to analysts and investors that it will be able to reignite growth. 

UAA Chart

UAA data by YCharts

The Estimates

Analysts are estimating the company had a loss per share of $0.06 in the second quarter, while revenue grew by 7.6 percent to $1.077 billion. Estimates for the quarter had fallen dramatically since the start of 2017, when investors were looking for revenue of roughly $1.23 billion and EPS of 0.03.

Analysts have also slashed the company's annual revenue numbers by nearly 12 percent since January. They now stand at $5.35 billion, which would give the business top-line revenue growth of only 11 percent in 2017. 

(Chart Provided by YCharts)


Year-over-year revenue growth from previous quarters has fallen by nearly 24 percentage points since the fourth quarter of 2015. This slowdown in growth has contributed heavily to the stock's fall from grace. This is especially remarkable given the company's lofty valuation of 40 times 2018 earnings. 

UAA PE Ratio (Forward 1y) Chart

UAA PE Ratio (Forward 1y) data by YCharts

Bullish Sentiment?

The recent company struggles aren't stopping some from making a short-term bullish bet that Tuesday's results may be better than feared. Under Armour stock is advancing by over 4 percent ahead of the results on August 1.

Options trading is showing that the most active contracts are expiring this week, August 4. The $22 calls have traded nearly 5,200 contracts on the day, more than 16 times the prior open interest of 366 contracts. For the $22 calls to be profitable, the stock would need to rise by over 11.5 percent and trade at a price above $22.60. 

(Interactive Brokers)

Despite the bullish sentiment ahead of tomorrow's earnings report, the long-term fundamentals will continue to be the key for the stock moving forward. The company will need to have a convincing beat and have laid out a clear plan on how it plans to reignite growth. A company with a lofty valuation such as Under Armour needs such growth to fuel a higher stock price.  

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.