Athletic apparel and footwear giant Nike (NYSE: NKE) faces plucky competition from a company whose origin involved its founder’s sweat-soaked t-shirts. Under Armour’s (NYSE: UA) CEO Kevin Plank started the sportswear maker in 1996 when he created a compression t-shirt to wick away the sweat he produced while playing football for the University of Maryland.

From there, Plank’s company began to produce high-quality compression apparel and has grown sales from $17,000 in that first year to more than $1.4 billion in 2011. Although the synthetic material used to make compression t-shirts—form-fitting garments that allow moisture to escape faster than cotton-—had existed previously, Plank was the first to apply it to t-shirts.

Under Armour ignited the boom in the compression-wear market by shrewdly targeting its initial marketing toward football players. But the company has since extended its offerings to casual apparel, sports accessories, footwear and cotton-based products—many of which directly compete with Nike’s product lines.

Although Nike’s “swoosh” remains one of the most recognizable logos in the world, Under Armour has built a powerful brand of its own. Four years after introducing its first line of footwear in 2006, Under Armour became Major League Baseball’s official supplier of performance footwear.

Under Armour’s products are already offered in over 23,000 retail locations across the US, and in 2007 the company began operating its own stores. At the end of 2010, Under Armour had 54 factory outlets that sell directly to consumers in 34 states.

Under Armour’s expansion into direct-to-consumer sales should provide the company with higher margins on its products and boost its bottom line. During the third quarter, the company’s direct-to-consumer net revenue grew 73 percent from the year ago-period and accounted for 22 percent of overall net revenue.

The company expanded into international markets in 2008, establishing a presence in Europe and Japan. Foreign markets accounted for 7.1 percent of Under Armour’s net revenue during the third quarter.

Under Amour’s recent entry into the footwear market threatens to chip away at Nike’s 95 percent share of this $18 billion market. Although footwear only accounted for 11.2 percent of Under Armour’s third-quarter net revenue, this product line’s net revenue grew 96.7 percent year over year.

Nike’s dominance extends to the rest of the sports apparel industry, offering Under Armour an opportunity to grow by steadily encroaching upon Nike’s territory. Over the past five years, Under Armour’s revenue has leaped 31 percent annually, compared to only 6 percent annual growth from Nike.

Under Armour’s net income grew 42 percent in 2010 and analysts expect that 2011 will be an even better year for the company’s bottom line. After a strong third-quarter performance, management raised guidance for 2011, forecasting revenue growth of 37 percent to 38 percent due to stronger-than-expected growth across its product lines. By contrast, the company’s sales rose 24 percent in 2010.

Although Under Armour’s shares trade at 43 times earnings, this multiple is justified by robust annual revenue growth. The company expects to see continued growth from its strong outlet expansion, new product lines and entry into the massive cotton-based market with its line of regular apparel.