Thursday, April 26, 2018

Analysis of Nike 2018


Logo of Nike 2018

Company: Nike

Business: An American company that are selling and developing athletic footwear, apparel, equipment and accessories. They have several brands: Nike, Nike+, Hurley, Jordan Brand and Converse.

Active: They are present world wide and they are known world wide by name and symbol.

P/E: 25.6

For a previous analysis please click on analysis of Nike 2017.

Contrarian analysis of Nike 2018 with P/E, P/B, ROE as well as dividend.

The P/E of Nike is very high with 25.6 and so is the P/B with 8.8 which gives a clear no go from Graham. Earnings to sales are ok with 12% and the ROE is excellent with 34.2%. The book to debt ratio is full ok with 1.1.
In the last five years they have had a yearly revenue growth rate of 6.3% which is excellent and this gives us a motivated P/E of 19 to 21 which means that the market is currently overvaluing Nike.
They pay a tiny dividend of 1% which happily only correspond to 27% of their earnings so they should be able to keep it up.

Conclusion: Graham says no and so do I. The P/E and P/B is too high, the ROE is great but the dividend is meaningless. I will remain as a shareholder fully knowing that next year will be a tough one due to the taxes but I will not increase my position any further.

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