Visit our Substack for more: https://www.overlookedalpha.com
At a share price of 124, Nike stock has a market cap of 195.7 billion dollars.
With 10.6 billion of cash, including short term investments, and 8.9 billion of long term debt the enterprise value is around 194 billion.
That’s the rough figure you’d have to pay if you wanted to buy the company outright. Over the last 12 months, Nike has made just over 49 billion dollars in revenue and earned 5.6 billion dollars in net income.
That means Nike stock is currently valued at 3.9 times revenue or 35 times earnings. And Nike stock also pays a dividend of just over 1%.
Looking at a historical chart, Nike typically trades between 20-30 times earnings. So the current 35 times earnings multiple is not cheap, particularly as we move into a higher interest rate environment.
But investors like to pay up for quality stocks in uncertain times. And Nike is certainly a quality company. Earnings have grown at a remarkably consistent rate over the past 15 years, just over 11% compounded. And free cash flow has grown around 9.2% as well.
At a share price of 124, Nike stock has a market cap of 195.7 billion dollars.
With 10.6 billion of cash, including short term investments, and 8.9 billion of long term debt the enterprise value is around 194 billion.
That’s the rough figure you’d have to pay if you wanted to buy the company outright. Over the last 12 months, Nike has made just over 49 billion dollars in revenue and earned 5.6 billion dollars in net income.
That means Nike stock is currently valued at 3.9 times revenue or 35 times earnings. And Nike stock also pays a dividend of just over 1%.
Looking at a historical chart, Nike typically trades between 20-30 times earnings. So the current 35 times earnings multiple is not cheap, particularly as we move into a higher interest rate environment.
But investors like to pay up for quality stocks in uncertain times. And Nike is certainly a quality company. Earnings have grown at a remarkably consistent rate over the past 15 years, just over 11% compounded. And free cash flow has grown around 9.2% as well.
Category
🗞
NewsTranscript
00:00 At a share price of $124, Nike's stock has a market cap of $195.7 billion.
00:05 With $10.6 billion of cash including short term investments and $8.9 billion of long term debt,
00:12 the enterprise value is around $194 billion. That's the rough figure you'd have to pay if
00:17 you wanted to buy the company outright and over the last 12 months, Nike has made just
00:22 over $49 billion in revenues and earned $5.6 billion in net income. That means Nike's stock
00:28 is currently valued at 3.9 times revenue or 35 times earnings. And Nike's stock also pays a
00:34 dividend of just over 1%. Looking at a historical chart, Nike typically trades between 20 to 30
00:40 times earnings. So the current 35 times earnings multiple is not cheap, particularly as we move
00:45 into a higher interest rate environment. But investors like to pay up for quality
00:49 stocks in uncertain times and Nike is certainly a quality company. Earnings have grown at a
00:54 remarkably consistent rate over the past 15 years, just over 11% compounded annually. And free cash
01:01 flow has grown strongly as well, around 9.2% a year. Nike also has one of the strongest brands
01:07 in the world. A recent report by Interbrands put Nike's brand value at around $50 billion,
01:11 which is roughly one quarter of the current market cap. If we look at another historical
01:16 chart, this blue line shows Nike's stock at 25 times earnings. So you can see the 25 times
01:22 earnings line has been a pretty good time to buy Nike over the last few years.
01:25 To put Nike's stock into perspective, let's say the company manages to grow earnings 10%
01:30 per year for the next 10 years and it manages to increase its dividend 10% a year as well.
01:36 Assume you reinvest those dividends and then the stock trades at 30 times earnings at the end of
01:40 those 10 years. That would take the share price up to around $310 in 10 years time for an investment
01:46 return of around 9.5% per year. So that's not too bad, you can't do too much wrong with Nike's stock
01:52 but it does look pretty fairly valued and I'd like to get it a bit cheaper. But these are my
01:57 own personal opinions, not financial advice and I do own some Nike shares. For more detailed
02:02 investing ideas, visit our website overlookedalpha.com