Stock (Symbol) |
Nike (NKE) |
Stock Price |
$59 |
Sector |
| Retail & Travel |
Data is as of |
| April 11, 2016 |
Expected to Report |
| Jun 23 – Jun 27 |
Company Description |
 NIKE, Inc. is engaged in the design, development, marketing and selling of athletic footwear, apparel, equipment, accessories and services. The Company sells its products to retail accounts, through NIKE-owned retail stores and Internet Websites (which the Company refers to as its Direct to Consumer or DTC operations), and through a mix of independent distributors and licensees throughout the world. The Company focuses its NIKE Brand product offerings in eight key categories: Running, Basketball, Football (Soccer), Men’s Training, Women’s Training, Action Sports, Sportswear and Golf. The Company also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking and outdoor activities. The Company’s portfolio brands include the NIKE Brand, Hurley and Converse. Source: Thomson Financial |
Sharek’s Take |
 Nike (NKE) is a fabulous stock. Last year I looked back at old Nike annual reports last year and saw great old pictures — like of founder Phil Knight and sports stars like Dan Fouts (in uniform). When I look back 30 years to NKE’s chart I see the stock was around 50 cents. Ten years later it was up ten-fold to around $5, then during the next decade the stock doubled to $10. Now NKE $59. Along the way there’s been bumps in the road, and periods where the stock went sideways, but overall this has been a fabulous stock. Today, Nike is still making it happen. The company had been growing profits better than 20% a qtr as the stock went higher. But then last qtr NKE only put out 9% profit growth, and Estimates call for 11% profit growth on average the next 4 qtrs. The issue is NKE went up so much these past years the P/E got to 28 last qtr, which is high for 10% growth. Thus, NKE has come down a bit. But the P/E is now 24, which is still a little high. My Fair Value on NKE is 23x earnings, which is $57 this year, and $66 next year. With the stock around $59 I’d rather wait to get a better price. It’s a world-class stock that I’d love to own, but the ten-year chart shows NKE went too-far too-fast the past few years and needs to digests its gains. |
One Year Chart |
 The one-year chart shows a clear view of how profit growth has slowed — and looks to stay around 10% for a while. Still, there’s some good things going on right now like lower oil cutting manufacturing and packaging costs, as well as a falling (or stabilizing) US dollar. NKE’s Estimated Long-Term Growth Rate is a solid 14%, tack on the 1% dividend and that’s an estimated 15% total annual return. One negative is this is a shoe company and they ride with the economy. So the stock might decline before we ever realize a recession is coming (or here). |
Fair Value |
 NKE had a profit decline in 2009, then a record high the next year. 2010 would have been the year to get in. But profits grew just 13% in 2011 and the stock sold for 20x earnings, so you would have had to pay up for quality (it was worth it). Recently the P/E has gotten a lot higher, and that’s what concerns me. |
Bottom Line |
 Nike is world-class company, one that has lowered its share count by 2% per year the last ten years through stock buybacks (source: Bob Pisani, CNBC) as well as paying out dividends of $3 during that time. NKE has delivered growth along with safety. But sometimes even the best stocks get extended, and with the stock going up faster than profits (19% vs 13%) I continue to feel NKE stock will take a breather. NKE is a fantastic stock, and I’ll look to buy in between $50 to $55. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
