NIKE shares fell by -20.6% during the day's afternoon session, and are now trading at a price of $74.81. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
an Increase in Expected Earnings Improves Its Value Outlook but Its Shares Are Expensive:
NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.06 and an average price to book (P/B) ratio of 3.18. In contrast, NIKE has a trailing 12 month P/E ratio of 22.0 and a P/B ratio of 7.82.
NIKE's PEG ratio is 2.06, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
An Excellent Current Ratio but Similar Gross Margins to the Industry Average of 48.17%:
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $36,397 | $39,117 | $37,403 | $44,538 | $46,710 | $51,217 |
| Gross Margins | 44% | 45% | 43% | 45% | 46% | 44% |
| Net Margins | 5% | 10% | 7% | 13% | 13% | 10% |
| Net Income (M) | $1,933 | $4,029 | $2,539 | $5,727 | $6,046 | $5,070 |
| Net Interest Expense (M) | -$54 | -$49 | -$89 | -$262 | -$205 | $6 |
| Depreciation & Amort. (M) | $747 | $705 | $721 | $744 | $717 | $703 |
| Diluted Shares (M) | 1,621 | 1,594 | 1,610 | 1,617 | 1,572 | 1,532 |
| Earnings Per Share | $1.19 | $2.53 | $1.58 | $3.54 | $3.85 | $3.31 |
| EPS Growth | n/a | 112.61% | -37.55% | 124.05% | 8.76% | -14.03% |
| Avg. Price | $53.52 | $69.39 | $83.41 | $103.46 | $147.56 | $126.56 |
| P/E Ratio | 44.23 | 27.0 | 51.17 | 28.58 | 38.33 | 38.24 |
| Free Cash Flow (M) | $3,927 | $4,784 | $1,399 | $5,962 | $4,430 | $4,872 |
| CAPEX (M) | $1,028 | $1,119 | $1,086 | $695 | $758 | $969 |
| EV / EBITDA | 16.9 | 19.82 | 36.28 | 21.92 | 31.88 | 28.19 |
| Total Debt (M) | $3,480 | $3,476 | $9,412 | $9,413 | $9,920 | $8,927 |
| Net Debt / EBITDA | 0.01 | 0.07 | 0.22 | -0.18 | 0.47 | 0.15 |
| Current Ratio | 2.14 | 1.98 | 2.66 | 3.07 | 2.69 | 2.74 |
NIKE benefits from an excellent current ratio of 2.74, growing revenues and a flat capital expenditure trend, and a strong EPS growth trend. The company's financial statements show generally positive cash flows and healthy leverage levels. Furthermore, NIKE has similar gross margins to its peers.
