Once the hottest story in athletic retail, Under Armour Inc (NYSE:UAA) has morphed into the coldest story in athletic retail. Under Armour stock soared from $13 in early 2013 to $50 my mid-2015 as a convergence of tailwinds led to operational momentum which had investors believing that Under Armour could become the next Nike Inc (NYSE:NKE).

That never happened.

Instead, UAA’s growth came off the wheels as soon the laps started getting tougher, and the North American business stalled out at a shockingly early point. The “next Nike” hopes faded. Under Armour stock dropped from $50 in mid-2015 to $11 in late 2017.

But, UAA stock is rebounding now. Over the past several months, a better-than-expected holiday earnings report has Under Armour stock trading above $16.

Is this rally legitimate? Yes. It’s supported by renewed revenue growth and gross margin improvements.

Can the rally continue? I don’t think so. Under Armour will continue to post sub-par revenue growth over the next several years, and Under Armour stock simply isn’t priced for that reality.

At $16, Under Armour stock looks fully valued. Here’s a deeper look.

Under Armour Is Still the Ugly Duckling in Athletic Retail

In athletic retail, it seems everyone is on fire right now.

Adidas AG (ADR) (OTCMKTS:ADDYY) continues to create on-trend retro styles and pivot its brand from niche-appeal performance to mass-appeal lifestyle. That company is growing revenues at a near 20% rate.

Nike, who had been getting their butts kicked by Adidas for several years, is finally fighting back. They are aggressively pushing innovation through their product pipeline and are also trying to pivot from performance to lifestyle.

That company is nearing a critical inflection point in North America, according to management, and is gaining significant momentum, according to management from Foot Locker, Inc. (NYSE:FL).

Meanwhile, Skechers USA Inc (NYSE:SKX) is on fire. So is Lululemon Athletica inc. (NASDAQ:LULU).

While this surging athletic retail backdrop may seem positive for UAA, I don’t think the athletic retail market is growing fast enough to accommodate all these hyper-growth players. Unless someone is losing market share.

That someone is UAA.

Under Armour has fallen on tough times recently. The brand’s popularity has come crashing down ever since its peak in mid-2015 for a plethora of reasons.

First, the company has failed to pivot from performance to lifestyle, so UAA remains niche-appeal and lacks mass-appeal.

Second, the brand’s big driver in 2014/15, NBA superstar Stephen Curry, has been plagued by injuries all year along. His team, the Warriors, have seemingly lost their outright dominance in the NBA. Meanwhile, Nike’s NBA guys (LeBron James, Kevin Durant, Russell Wesbrook, etc) and Adidas’ NBA guys (James Harden) continue to rise in popularity.

Third, UAA has diluted their brand value by aggressively expanding distribution at low-price retailers like Kohl’s Corporation (NYSE:KSS). When your stuff is front and center at Kohl’s, but not at Foot Locker, consumers tend to “downgrade” the value of your brand.

For all these reasons, UAA finds itself as the ugly duckling in athletic retail. And because everyone is else is red-hot right now, the climb back for UAA will be a tough one.

Valuation on Under Armour Stock Looks Full

Going forward, UAA won’t be able to grow revenues at a robust rate. Revenues inched up 3% last year, and are expected to inch up at a similar rate this year. Even if growth does pick-up somewhat, at best, this is a 5% revenue growth story over the next five years.

Margins are also showing signs of bounce-back potential. But gross margins will be a continued battle between price point stabilization and higher direct-to-consumer expenses. Meanwhile, operating margins won’t zoom higher so long as gross margins remain challenged.

Operating margins should be able to grow to 5-10% over the next 5 years, from 3% last year. Roughly 5% revenue growth per year and 7.5% operating margins in 5 years implies revenues of $6.35 billion and operating profits of $476 million.

Taking out $45 million for net interest expense, 26% for taxes, and dividing by a presumably reduced share count of 215 million, you arrive at earnings per share of roughly $1.48 in 5 years.

A market-average 16-times forward multiple on those $1.48 earnings implies a 4-year forward price target of roughly $23.70. Discounting that back by 10% per year, you arrive at a present value of roughly $16 for Under Armour stock.

Bottom Line on UAA Stock

Under Armour stock won’t be a big winner from its current levels. Competition is ramping, the brand continues to lose where it matters most, and the stock is already priced for modest growth.

I don’t see much upside from here.

As of this writing, Luke Lango was long SKX and FL.