2 Numbers I'm Watching in Under Armour Inc's Earnings Report

Under Armour has reported more than a 20% rise in year-over-year revenue for 18 quarters in a row, and it could be set to do so againwhen the company reports fourth-quarter and year-end results on Feb. 4. However, rising revenues aren't the most important thing to watch. Let's look at two other crucial numbers for judging whether Under Armour can continue its aggressive growth for years to come.

How Under Armour is "marginally" betterWhile the 30% rise in total revenues in the most recent reported quarter was exciting, Under Armour is young and still in its growth period, so we can expect that year-over-year revenue growth is going to be high -- compared with, say, Nike, which has been around for much longer.

The more compelling number was the company's nearly 50% gross margin during the most recently reported quarter. Gross margin refers to how well a company can control production costs, as well as how effective its pricing strategy is. Because Under Amour is able to charge a relatively high price for its gear -- relative to industry standards, and also compared with its cost of goods sold -- more of each dollar of revenue passes into operating income.

UA Gross Profit Margin (TTM) data by YCharts

When the new numbers come in, look to see how well gross margin continues to perform year over year. In 2013, the company reported 48.7% gross margin for the year in total, and last quarter the number was up to 49.6%. Seeing this number continue to rise raises hope that Under Armour will be able to keep its premium-pricing strategy working. I'm hoping to see this number reach 50% for the year.

Gross margin may be high, but net profit margin is too low, right?While gross margin shows the percentage of each dollar of sales that goes into operating income after cost of goods sold is accounted for, net profit margin takes into account the amount of each dollar of sales that actually makes it to the company's bottom line, once other operating and investing activities are accounted for.

Under Armour lags the market in net profit margin, at just 9.5% in the most recent quarter. But let's dive a little deeper into this number.

Over the past couple of years, Under Armour has invested in new marketing campaigns, better products, and more technology. In 2014 the company upped its marketing with new campaigns such as the "I Will What I Want" campaign geared toward active women around the world, and it worked to make new and improved products such as the Speedform shoes it developed in 2013 and improved upon in 2014. It's also recently broken into the fitness app world with the release of Record, a fitness tracking app released following Under Armour's acquisition of the MapMyFitness app. These are the kinds of growth-inducing investments in marketing, R&D, and acquisitions that should make investors comfortable with a lower net profit margin if it means higher growth for years to come.

AmericanballerinaMisty Copeland as one of the "I Will What I Want" campaign athletes. Photo: Under Armour.

That growth is already evident, given the 30% rise in overall revenues, 50% rise in footwear segment revenue, and 94% rise in international sales year over year during the most recent quarter. If the company can continue to post strong growth anywhere near these numbers during 2015, and if gross margin remains high, having a low net profit margin is OK for now.

The article 2 Numbers I'm Watching in Under Armour Inc's Earnings Report originally appeared on Fool.com.

Bradley Seth McNew owns shares of Apple. The Motley Fool recommends and owns shares of Apple, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.