In 1996, former University of Maryland football player Kevin Plank decided to create a shirt that absorbed sweat, but stayed dry and light. Today Under Armour (NASDAQ: UARM) supplies athletic apparel to the National Hockey League, national lacrosse league, USA rugby, and the US Ski Team, to name a few. But can the rookie compete with the big boys of the athletic apparel industry?

[#1] The brand is one of the most respected names to millions sweating it out recreationally and professionally, and that creates something rare nowadays: customer loyalty.

[#2] The company generated approximately $281 million in sales last year versus approximately $205 million the year before.

[#3] Licensing revenue grew 127 percent in 2005 to $9.8 million and will be a very lucrative part of their business.

[#4] UARM is predicting growth of 20 to 25 percent in 2006; the company has roughly $58.2 million in cash and very little debt.

[#5] The company announced its entrance into the billion dollar footwear market, projecting $8 to $10 million in sales this year for its new line of football cleats.

[#1] The stock doubled on its first day of trading when it had its initial public offering back in November of 2005. It smells like hype to me.

[#2] UARM has an exorbitantly high Tax Rate at 41.5 percent, meaning that Uncle Sam is happy and shareholders are not.

[#3] UARM has given guidance that the company will make between $23 and $26 million in profit in 2006, giving it an extremely high P/E ratio (price-earnings ratio).

[#4] Competitors with much greater scale, like Nike and Adidas, are making products very similar that may dilute UARM's distinctive qualities.

[#5] Even in clothing, technology changes dramatically. UARM's competitive advantage might be in jeopardy if something cheaper and more efficient comes out.

Under Armour of Baltimore, Maryland, is stepping up its game against some major players in the sporting apparel industry. This is great news for avid sports players and amateurs alike who want the best quality products their money can buy. The company keeps a line-up of collegiate and professional football players dry, but should you sweat the stock?

[#1] UARM is growing extremely fast at 25 percent as forecasted by Yahoo! Finance - a great achievement when compared to Adidas at 12 percent and Nike at 14 percent.

[#2] The company is operating in a differentiated market, which helps it maintain higher prices and profit margins.

[#3] With tremendous potential to continue building its brand name through sponsorships, UARM's recognition and appeal will likely increase.

[#4] A hugely innovative company, products target serious athletes who can appreciate the performance and design behind them.

[#5] UARM, less established abroad than it is domestically, recently opened European headquarters in Amsterdam, and assigned one of its best executives to European growth.

[#1] With a P/E ratio (price-earnings ratio) over 79 and a PEG (P/E to growth) ratio of 2.35, there could be other companies with comparable returns without as much risk.

[#2] Stock performance has been very volatile since it went public last year, and UARM will likely continue this streak for a few years.

[#3] UARM has very dominant rivals with much more widespread brand recognition and financial resources.

[#4] As with any growing company, there is concern for how long growth can be sustained. Eventually, UARM will mature and growth will slow.

[#5] UARM faces immense pressure to use its brand equity to increase profits, but too many products could diminish its brand image, quality, or differentiated technologies.
 

Sources: infoplease.com; investopedia.com