Is Nike Stock Overvalued
Is Nike Stock Overvalued?
Nike, Inc. (NYSE: NKE) is a global publicly traded company that designs, manufactures, and sells athletic shoes, apparel, and accessories. The company is headquartered in Beaverton, Oregon, and employs more than 73,000 people worldwide.
Nike’s products are sold in over 160 countries and territories. In fiscal year 2017, Nike generated $36.4 billion in revenue. The company’s net income was $4.2 billion, and its diluted earnings per share were $2.06.
Nike’s financial performance has been strong in recent years. In the past three fiscal years, Nike’s revenue has grown at an average annual rate of 10.4%, and its net income has grown at an average annual rate of 11.4%.
The company’s growth has been driven by a combination of increased sales volume and higher average selling prices. Nike has been able to grow its sales volume by expanding its product offering, increasing its market share, and improving its distribution network.
The company has also been able to grow its average selling prices by raising its prices and by increasing the percentage of sales that come from higher-priced products.
Nike has a strong brand and a loyal customer base. The company’s products are considered to be high quality and are associated with a premium price.
Nike is also a very profitable company. The company’s net profit margin is 14.4%, and its return on equity is 26.4%.
Nike’s financial performance is attractive, and the company has a strong competitive position. However, some investors believe that Nike’s stock is overvalued.
The following are some of the arguments for why Nike’s stock may be overvalued:
1. Nike’s stock is expensive. Nike’s stock has a price-to-earnings ratio of 30.8, which is significantly higher than the average price-to-earnings ratio of the S&P 500 Index of 20.5.
2. Nike’s growth is slowing. Nike’s revenue growth has slowed in recent years. In fiscal year 2016, Nike’s revenue growth was 12.0%, and in fiscal year 2017, Nike’s revenue growth was 10.4%.
3. Nike’s margins are shrinking. Nike’s net profit margin has decreased from 15.6% in fiscal year 2016 to 14.4% in fiscal year 2017.
4. Nike’s competitive position is weakening. Nike’s market share is being eroded by competitors such as Adidas and Under Armour.
The following are some of the arguments for why Nike’s stock may not be overvalued:
1. Nike is a strong company with a proven track record. Nike has a long history of profitable operations and has a strong brand.
2. Nike is a leader in the athletic shoe market. Nike has a significant market share in the athletic shoe market and is the dominant player in the industry.
3. Nike is expanding into new markets. Nike is expanding its product offering and is targeting new markets such as China and India.
4. Nike has a strong distribution network. Nike has a large global distribution network that enables it to sell its products to consumers in over 160 countries.
5. Nike is increasing its prices. Nike has been able to increase its prices and its average selling prices are among the highest in the industry.
6. Nike has