Stock (Symbol) |
Nike (NKE) |
Stock Price |
$55 |
Sector |
| Retail & Travel |
Data is as of |
| April 13, 2017 |
Expected to Report |
| Jun 26 |
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 having trouble competing against Adidas, which has better looking shoes. Nike has a very lightweight shoe, but the look is rather cheap compared to Adidas because the Nike swoosh isn’t sewn in. Instead it’s melted on like a plastic label. Also, Adidas is killing it with its retro look. Nike should really copy this format. As far s the stock goes, future orders are what analysts are looking at with NKE, and those have declined from 5% three qtrs ago to 1% two qtrs ago and -4% last qtr. Still, the company was able to cut expenses, buyback stock, and deliver 24% profit growth last qtr — which easily beat the street. NKE is amazing stock, during the past 30 years it’s gone from fifty cents to 50 dollars. Right now the stock is down, but it has two years of support around this $50 level, which is a good sign. Last year when the stock was $65 NKE had a P/E of 30 as profits had just grown 24% in the latest fiscal year (ending May 2015). That 30 P/E was hard to sustain, as history shows NKE used to have a P/E of around 20. These charts and tables were done on April 14 when the stock was $55. Since then it has fallen to $52, and I feel this is a great buying opportunity for patient conservative investors. NKE has an Estimated Long-Term Growth Rate of 12% per year plus pays a 1% dividend. The company has its fiscal year end May 31st, which is just days away. Thus if we look at next year’s earnings to calculate a P/E it comes up as 20. NKE’s median annual P/E hasn’t been this low since 2011! This is a high quality company has an excellent safety rating and is part of the Dow. Also, NKE has been hurt by F/X and now the USD is down to six-month lows. I feel the weaker dollar could prove to be a catalyst for this stock and I will add it to the Conservative Growth Portfolio today. |
One Year Chart |
 The 24% profit growth came was partially due to a lower tax rate. Sales grew 5% and increased 7% on a currency neutral basis. The P/E in this chart is 22, which was when NKE was $55. Now the stock is $52 and the P/E 20. Profit estimates continue to decline some, but that may change with the dollar weakening (which would bring up estimates, hypothetically). Qtrly profit estimates are 2%, -7%, 18% and 1% (this last figure is low because NKE just whipped estimates and analysts haven’t upped their figures yet). The Est. LTG of 12% for a safe stock like this is very good. NKE has beaten the street by a good margin in each of the last three qtrs. |
Fair Value |
 I feel NKE should sell for 22x earnings, which gives me a $56 Fair Value for next year. Plus investors get a little dividend. If Nike goes to $65 in two to three years that would be a gain of 25% in the stock in addition to the dividends — not bad. But…profit estimates are eroding so this may be optimistic. |
Bottom Line |
 Nike is very safe stock that’s grown profits in nine of the last ten years and has increased its dividend every year during the past decade. Although Under Armour and Adidas are taking market share, Nike’s scientists and designers will continue to innovate. I will add NKE to the Conservative Growth Portfolio today. The stock will rank 17th of 32 stocks in this portfolio’s Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 17 of 32 |
