For most of 2018, the athletic retail scene in the stock market has been dominated by a resurgent Under Armour (NYSE:UAA) out-performing an also resurgent Nike Inc (NYSE:NKE). Whether it is a sustainable bump for Under Armour stock remains to be seen.

Nike stock, up 24% on the year, has been bid up as investors have expressed optimism regarding the company’s operational turnaround in North America through product innovation and direct sales.

But that rally pales in comparison to the run Under Armour has had in 2018. Under Armour stock is up more than 50% year-to-date on some combination of hopes for a bounce-back in the North America business and stabilization in the margin narrative.

If you’ve made money on these trades thus far in 2018, I applaud you. Good job.

But we are now seven months into 2018, and these stocks have had their runs. Upside over the next five months will be tough to come by.

NKE stock may have a tough time justifying a far above-average valuation with such huge competitive risks from Adidas and Puma (yes, Puma is all the sudden a red-hot brand). But the stock is only up 24% on the year and isn’t that overvalued, so the correction won’t be that big.

The story is much different when it comes to Under Armour.

UAA stock is up more than 50% year-to-date. The stock trades at nearly 130-times forward earnings, and 32-times trailing EBITDA. North America revenue growth is still negative. Gross margins are still falling. And competition is only getting tougher.

That isn’t a recipe for success of UAA stock. As such, I wouldn’t be surprised to see UAA stock take a tumble here and now.

Here’s a deeper look.

The Under Armour Growth Narrative Is Challenged

At its core, the growth narrative just isn’t that good for Under Armour stock.

The stock has bounced this year to over $20 because investors are hopeful that North America sales will rebound, thanks in part to success in the company’s athlete portfolio (Under Armour athletes Stephen Curry, Golden State Warriors, and Dwayne “The Rock” Johnson had very good years).

Investors were also hopeful that international sales would remain red-hot, and the margins would start rebounding.

But none of that is presently happening. And the outlook for it to happen over the next several years is bleak.

North America sales growth is still negative. Granted, it is moderating, and sales were down just one percent last quarter. But growth is still negative. And the competitive backdrop is only getting more fierce.

Comparing Google Search Trends among the Big 3 in the athletic retail (Nike, Adidas, and Under Armour), there really aren’t any signs that Under Armour is gaining popularity in the U.S. If anything, the trend remains that Under Armour is losing share.

Plus, Nike’s most recent quarterly numbers affirm that they are winning in North America. So who exactly is losing as a result of Nike regaining market share in North America?

Adidas is growing by more than 20% in North America. So, clearly not Adidas. Under Armour? Growth is negative there. All signs, then, point to Under Armour’s growth in North America only weakening.

What about red-hot international sales? Those are consistently cooling. Two years ago, international revenue growth at UAA was north of 60%. A year ago, it was north of 50%. Last quarter, Under Armour grew international revenues by less than 20%.

In other words, the international business is following in the footsteps of the North America business, and that means moderate growth is the most likely outcome over the next several years.

As for margins, well, they still aren’t in rebound mode. Nor will they be anytime soon. In order to compete more effectively, Under Armour is diluting their margin profile by selling through discount distribution channels like Kohl’s Corporation (NYSE:KSS). So long as this persists, margins won’t rebound in any meaningful way.

Under Armour Stock Isn’t Worth Much More Than $20

Overall, the story at Under Armour really isn’t that good, despite the big bounce in UAA stock.

What is the investment implication of that? A big correction is due for UAA stock.

This is a company with mild growth prospects in both its North America and international business segments, and mild margin expansion potential. That means that Under Armour isn’t much more than a 5% revenue growth company with mitigated margin drivers.

That combination leads me to believe that Under Armour can net around $1.50 in earnings per share in 5 years. A market-average 16-times forward multiple on $1.50 implies a four-year forward price target of $24. A growth-average 20-times forward multiple on $1.50 implies a four-year forward price target of $30.

If you discount both of those back by 10% per year, you arrive at a present-day value for UAA stock of between $16 and $20. Thus, above $20, UAA stock seems unreasonably overvalued.

Bottom Line on Under Armour Stock

Fade the rally in UAA stock. The rally in 2018 has been nothing short of a miracle, and that miracle is running out of fairy dust because Nike is back, Adidas is still hot, and Puma is all the sudden playing the role of favorite underdog. Soon enough, UAA stock will fall back below $20.

As of this writing, Luke Lango was long KSS.