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NIKE
Presentation OutlinePresentation Outline
Snapshot Brief Overview Financial Statements Industry Comparison Current News Technical Analysis Trend Analysis Eval Summary of
Valuations
Analysts Recommendations
Risk Investment
Recommendations
Snapshot
Sector Consumer Cyclical
Industry Footwear
Market Cap. 21.738 billion
Ticker Symbol NKE
Recent Stock Price $84.11
52wk High $92.43
52wk Low $75.10
Beta .83
Brief Overview NIKE’s principal business activity is the design, development and
worldwide marketing of high quality footwear, apparel, equipment, and accessory product
The largest seller of athletic footwear and athletic apparel in the world
Distributed in over 160 countries around the world Sell under the NIKE brand, wholly owned subsidiary Converse,
Cole Haan, g Series, Bragano, Hurley, NIKE Hockey, and Exeter brands
Main competitors have joined with the recent announced acquisition of Reebok by Adidas
Overview
Nike’s best year was last year. The US accounts for 46% of revenues. Market Cap doubled in 1 year, mostly due to
the growth in US footwear sales. Internet market share makes buying shoes
easy. No such thing as bad publicity.
Financial Statements Sales growth has consistently grown over the last four years
– 4.3% in 02’ 8.1% in 03’ 14.5% in 04’ 12.1% in 05’ Increase in Gross Margin from 39%-45%, however this is not
likely to continue to grow in future years Red Flags…
Industry ComparisonRatio NKE Industry Sector S&P500
P/E 17.09 17.33 17.38 19.63
Beta .64 2.31 1.12 1
Price to Sales 1.61 1.49 1.21 2.76
Current Ratio 1.92 4.07 2.91 1.71
ROA 15.25 14.55 7.45 7.62
ROI 19.98 19.07 9.95 11.46
ROE 24.04 22.71 14.3 18.96
Receivable Turnover 6.26 7.33 6.60 10.39
Inventory Turnover 4.44 4.49 8.53 13.02
Current News England just banned the use of a chemical that
is used in the production of leather shoes. The affects on NIKE have yet to be determined.
Adidas announce its acquisition of Reebok. These are the two biggest competitors, who when combined, will be roughly the size of NIKE.
Technical Analysis• Support level 76 dollars per share
• Resistance level approximately 92 dollars a share
In the last Year…
Last 5 years…• Support level at 39 dollars a share
Technical Analysis Continued…
• In line with its 200 day moving average
• Has tended to less volatility over the last 2-3 years
Trend Analysis
Inventory Trends
Leverage Analysis
Operating Cash Flow
Revenue BreakdownNIKE, Inc.DIVISIONAL REVENUES
Q1 05 Q2 05 Q3 05 Q4 05 YTD FY 05 Q1 06 YTD FY 06 1 Year Quarterly Growth
U.S. Region
Footwear 921.4 680.0 849.6 907.2 24.4% 1,021.1 26.4% 10.8% Apparel 391.3 384.7 345.8 335.9 10.6% 395.5 10.2% 1.1% Equipment 89.0 67.3 72.8 84.3 2.3% 92.3 2.4% 3.7% Total 1,401.7 1,132.0 1,268.2 1,327.4 37.3% 1,508.9 39.1% 7.6%
EMEA Region
Footwear 663.3 531.8 615.3 689.6 18.2% 685.1 17.7% 3.3% Apparel 409.7 370.0 351.3 366.1 10.9% 435.2 11.3% 6.2% Equipment 84.9 59.3 67.3 73.0 2.1% 97.2 2.5% 14.5% Total 1,157.9 961.1 1,033.9 1,128.7 31.2% 1,217.5 31.5% 5.1%
Asia Pacific Region
Footwear 218.6 236.6 237.9 269.8 7.0% 237.4 6.1% 8.6% Apparel 148.8 207.8 188.3 210.6 5.5% 176.5 4.6% 18.6% Equipment 38.6 39.1 46.6 54.6 1.3% 45.7 1.2% 18.4% Total 406.0 483.5 472.8 535.0 13.8% 459.6 11.9% 13.2%
Americas Region
Footwear 114.8 129.8 99.6 134.4 3.5% 156.9 4.1% 36.7% Apparel 35.5 46.9 33.5 53.2 1.2% 40.7 1.1% 14.6% Equipment 11.4 12.6 10.6 13.5 0.4% 16.1 0.4% 41.2% Total 161.7 189.3 143.7 201.1 5.1% 213.7 5.5% 32.2%
3,127.3 2,765.9 2,918.6 3,192.2 87.4% 3,399.7 88.0% 8.7%Other 434.5 382.4 389.6 529.2 12.6% 462.3 12.0% 6.4%
Total NIKE, Inc. revenues3,561.8 3,148.3 3,308.2 3,721.4 100.0% 3,862.0 100.0% 8.4%
EVal
Summary of Valuations
Analysts Recommendations
Analysts have a price target between 95-110 dollars depending on one or two year return
Consensus recommendation is OUTPERFORM Mean rating is a 1.84, down from a 2.06 two months
ago
NIKE Risk Risk Grade – 103 (Max 134) Over 3/4 of all stocks available are more risky than NIKE
Risk Cont’d
Portfolio with NIKE
Risk Grade of 60 vs. current risk grade of 62 An analysis of our current portfolio labels consumer
discretionary as the most underweight sector compared to the benchmark
Interesting Facts:– Nike NEVER made an offer to buy Under Armor– They had Nike Shocks well before they were sold
in store but decided to hold sale until Michael Jordon retired and his shoe line lost popularity
Investment Recommendations Positive: Company has strong potential if it can tap into the
foreign markets (China and International Soccer). A purchase of 65 shares would account for 4.65% of the portfolio and would have a market value 5,382 dollars.
Negative: – Right now too much stress is put on the strength and growth of the
US Footwear sector.
– The abroad sector that is expected to grow contributes a low percentage of overall revenue. However, this does leave room for rapid growth and expansion.
– The company has doubled its market cap. over the last five years and has seen a very wide trading range between 50 and 90 dollars.