Market Capitalization: $133.64 Billion
Shares Outstanding: 1.50 Billion
Sector: Consumer Cyclical
Industry: Footwear & Accessories
Analysis as of: October 1, 2024

1. Company Overview

NIKE, Inc. (NYSE: NKE) is a global leader in the design, development, marketing, and sales of athletic footwear, apparel, equipment, and accessories. Founded in 1964 and headquartered in Beaverton, Oregon, NIKE operates worldwide and is one of the most recognized brands in the athletic industry.

Key Brands and Products:

• NIKE Brand: Athletic and casual footwear, apparel, and accessories.
• Jordan Brand: Products under the Jumpman trademark.
• Converse: Footwear and apparel under trademarks such as Converse, Chuck Taylor, All Star, One Star, and Jack Purcell.

NIKE sells its products through a mix of independent distributors, licensees, and subsidiaries in approximately 170 countries. The company also operates direct-to-consumer (DTC) channels, including retail stores and digital platforms.

2. Financial Performance

a. Revenue and Growth

• Trailing Twelve Months (TTM) Revenue: $50.01 Billion
• Year-over-Year (YoY) Revenue Growth: -2.83%

Revenue Trend (Fiscal Years Ending May 31):

Fiscal Year	Revenue (in Billions)	YoY Growth
FY 2020	$37.40	-4.38%
FY 2021	$44.54	+19.08%
FY 2022	$46.71	+4.88%
FY 2023	$51.22	+9.65%
FY 2024	$51.36	+0.28%
TTM 2024	$50.01	-2.83%

Analysis: NIKE experienced strong revenue growth in FY 2021 and FY 2023. However, the TTM revenue shows a decline of 2.83%, indicating potential challenges such as market saturation, increased competition, or supply chain disruptions. The minimal growth in FY 2024 (+0.28%) suggests a plateau in revenue expansion.

b. Profitability

• Net Income (TTM): $5.30 Billion
• Earnings Per Share (EPS, TTM): $3.49
• Profit Margin: 10.60%
• Return on Equity (ROE): 37.98%
• Return on Assets (ROA): 10.65%
• Return on Invested Capital (ROIC): 15.22%

Analysis: Despite the revenue decline, NIKE maintained profitability with a net income growth of 4.93% YoY. The profit margin of 10.60% is healthy for the industry. High ROE indicates efficient use of shareholder equity to generate profits. ROA and ROIC figures demonstrate effective asset and capital utilization.

c. Cash Flow

• Operating Cash Flow (FY 2024): $7.43 Billion (+27.19% YoY)
• Capital Expenditures (CapEx, FY 2024): -$812 Million
• Free Cash Flow (FCF, FY 2024): $6.62 Billion (+35.82% YoY)
• Free Cash Flow Margin: 12.88%
• Free Cash Flow Per Share: $4.33

Analysis: NIKE’s operating cash flow increased significantly, reflecting strong cash generation from operations. The increase in free cash flow provides the company with flexibility to invest in growth opportunities, pay down debt, or return capital to shareholders through dividends and share repurchases.

d. Balance Sheet

• Total Assets: $37.87 Billion
• Total Liabilities: $23.92 Billion
• Total Debt: $12.13 Billion
• Cash & Equivalents: $10.29 Billion
• Net Debt Position: – $1.83 Billion
• Net Cash Per Share: – $1.22
• Equity (Book Value): $13.94 Billion
• Debt-to-Equity Ratio: 0.87
• Current Ratio: 2.36
• Quick Ratio: 1.42

Analysis: NIKE’s balance sheet shows a net debt position of $1.83 billion, indicating that total debt exceeds cash reserves. However, liquidity ratios like the current ratio (2.36) and quick ratio (1.42) suggest that the company can meet its short-term obligations comfortably. The debt-to-equity ratio of 0.87 indicates moderate leverage.

3. Valuation

• Price-to-Earnings (PE) Ratio (TTM): 25.52
• Forward PE Ratio: 31.14
• Price-to-Sales (PS) Ratio: 2.69
• Price-to-Book (PB) Ratio: 9.57
• Price-to-Free Cash Flow (P/FCF) Ratio (FY 2024): 21.68
• PEG Ratio: 3.79

Analysis:

• PE Ratios: The TTM PE ratio of 25.52 and forward PE of 31.14 suggest that the stock is trading at a premium compared to the broader market, reflecting high investor expectations for future earnings growth.
• PB Ratio: A PB ratio of 9.57 indicates the stock is priced significantly above its book value.
• PEG Ratio: A PEG ratio of 3.79 may imply that the stock is overvalued relative to its earnings growth rate.

4. Market Performance

• Current Stock Price: $89.13
• 52-Week Range: $70.75 – $123.39
• 52-Week Price Change: -6.79%
• Beta: 1.02
• Dividend Yield: 1.66%
• Ex-Dividend Date: September 3, 2024

Analysis: The stock price has decreased by 6.79% over the past year, underperforming the broader market. The beta of 1.02 indicates that the stock’s volatility is similar to the market average. The dividend yield of 1.66% provides a modest income stream for investors.

5. Financial Health and Risks

a. Liquidity

• Current Ratio: 2.36
• Quick Ratio: 1.42

Analysis: NIKE has strong liquidity ratios, indicating that it can easily cover its short-term liabilities. The company maintains sufficient current assets relative to its current liabilities.

b. Leverage

• Debt-to-Equity Ratio: 0.87
• Debt-to-EBITDA Ratio: 1.46
• Interest Coverage Ratio: 23.64

Analysis: The company’s leverage is moderate. The debt-to-EBITDA ratio of 1.46 suggests that debt levels are manageable relative to earnings. A high interest coverage ratio indicates that NIKE can comfortably meet its interest obligations.

c. Operational Risks

• Inventory Management: Inventory turnover decreased to 3.25 times, which may indicate slower inventory movement and potential overstocking issues.
• Supply Chain Disruptions: Global supply chain challenges could impact production and distribution.
• Competition: Intense competition from other athletic apparel companies like Adidas and Under Armour.
• Market Saturation: In mature markets, growth may slow due to saturation.

d. Market Risks

• Economic Conditions: Consumer spending on discretionary items like athletic apparel can be affected by economic downturns.
• Currency Fluctuations: As a global company, NIKE is exposed to foreign exchange risks.
• Regulatory Risks: Changes in trade policies and tariffs can impact costs and pricing.

6. Conclusion

Pros:

• Strong Brand Recognition: NIKE is a leading global brand with a loyal customer base.
• Healthy Profitability: Consistent net income growth and strong profit margins.
• Efficient Operations: High return on equity (37.98%) and return on invested capital (15.22%) indicate effective management.
• Solid Cash Flow: Increased operating and free cash flow provide financial flexibility.
• Dividend Growth: The company has a history of dividend increases, with a 19-year streak of growth.

Cons:

• Revenue Decline: The TTM revenue decreased by 2.83%, which may signal slowing demand or market challenges.
• High Valuation Multiples: Elevated PE and PB ratios suggest the stock may be overvalued.
• Negative Net Cash Position: Net debt indicates the company has more debt than cash, which could be a concern if cash flows decline.
• Inventory Levels: Lower inventory turnover may lead to increased holding costs and potential markdowns.

Disclaimer:

This analysis is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making investment decisions. Past performance is not indicative of future results.