S&P 500   4,139.12 (-0.15%)
DOW   32,826.13 (+0.07%)
QQQ   320.00 (-0.54%)
AAPL   164.63 (-0.44%)
MSFT   279.84 (-1.09%)
META   170.60 (+2.09%)
GOOGL   117.22 (-0.21%)
AMZN   138.75 (-1.46%)
TSLA   873.72 (+1.07%)
NVDA   174.14 (-8.29%)
NIO   20.22 (+0.00%)
BABA   90.62 (-2.10%)
AMD   99.54 (-2.71%)
MU   61.48 (-1.57%)
T   18.03 (-1.74%)
CGC   3.15 (+16.67%)
GE   75.43 (+1.44%)
F   15.85 (+3.59%)
DIS   108.95 (+2.18%)
AMC   23.98 (+8.12%)
PYPL   96.01 (+0.72%)
PFE   49.27 (+0.00%)
NFLX   233.06 (+2.77%)
S&P 500   4,139.12 (-0.15%)
DOW   32,826.13 (+0.07%)
QQQ   320.00 (-0.54%)
AAPL   164.63 (-0.44%)
MSFT   279.84 (-1.09%)
META   170.60 (+2.09%)
GOOGL   117.22 (-0.21%)
AMZN   138.75 (-1.46%)
TSLA   873.72 (+1.07%)
NVDA   174.14 (-8.29%)
NIO   20.22 (+0.00%)
BABA   90.62 (-2.10%)
AMD   99.54 (-2.71%)
MU   61.48 (-1.57%)
T   18.03 (-1.74%)
CGC   3.15 (+16.67%)
GE   75.43 (+1.44%)
F   15.85 (+3.59%)
DIS   108.95 (+2.18%)
AMC   23.98 (+8.12%)
PYPL   96.01 (+0.72%)
PFE   49.27 (+0.00%)
NFLX   233.06 (+2.77%)
S&P 500   4,139.12 (-0.15%)
DOW   32,826.13 (+0.07%)
QQQ   320.00 (-0.54%)
AAPL   164.63 (-0.44%)
MSFT   279.84 (-1.09%)
META   170.60 (+2.09%)
GOOGL   117.22 (-0.21%)
AMZN   138.75 (-1.46%)
TSLA   873.72 (+1.07%)
NVDA   174.14 (-8.29%)
NIO   20.22 (+0.00%)
BABA   90.62 (-2.10%)
AMD   99.54 (-2.71%)
MU   61.48 (-1.57%)
T   18.03 (-1.74%)
CGC   3.15 (+16.67%)
GE   75.43 (+1.44%)
F   15.85 (+3.59%)
DIS   108.95 (+2.18%)
AMC   23.98 (+8.12%)
PYPL   96.01 (+0.72%)
PFE   49.27 (+0.00%)
NFLX   233.06 (+2.77%)
S&P 500   4,139.12 (-0.15%)
DOW   32,826.13 (+0.07%)
QQQ   320.00 (-0.54%)
AAPL   164.63 (-0.44%)
MSFT   279.84 (-1.09%)
META   170.60 (+2.09%)
GOOGL   117.22 (-0.21%)
AMZN   138.75 (-1.46%)
TSLA   873.72 (+1.07%)
NVDA   174.14 (-8.29%)
NIO   20.22 (+0.00%)
BABA   90.62 (-2.10%)
AMD   99.54 (-2.71%)
MU   61.48 (-1.57%)
T   18.03 (-1.74%)
CGC   3.15 (+16.67%)
GE   75.43 (+1.44%)
F   15.85 (+3.59%)
DIS   108.95 (+2.18%)
AMC   23.98 (+8.12%)
PYPL   96.01 (+0.72%)
PFE   49.27 (+0.00%)
NFLX   233.06 (+2.77%)

Is Nike An Undervalued Opportunity for Investors?

Is Nike An Undervalued Opportunity for Investors?

Nike (NYSE: NIKE) has been put on the watchlist of many investors following its sell-off. The company is currently down -32.94% YTD and significantly trails behind the S&P 500 at a -14.16% decline. Investors are watching this stock closely due to its performance significantly beating the S&P 500 over a long timeframe. The company returned 383.12% over the last ten years, while the return for this index returned 199.72%. Still, there are some challenges ahead for the company as it battles weakening growth prospects, and some still believe Nike to be an expensive pick. We will examine both the pros and cons of this stock to see if it deserves a spot in your portfolio.

Nike’s Valuation

Despite losing a considerable amount of the value of the stock, Nike's P/E ratio is still considerably higher than its peers in the consumer discretionary sector. The company's FWD P/E is 29.72, while the sector median is 13.41. To give an example of how it stacks up against one of its key competitors, Wolverine WorldWide (NYSE: WWW) has a P/E of 9.90. One could interpret Nike's higher than the sector median's P/E ratio in a couple of different ways. The company's long-term prospects could be seen as more attractive, so it, therefore, commands a higher price. The alternative interpretation is that it is relatively more inexpensive without the additional upside potential.

One thing to note about Nike's valuation is that it has fallen to near-record lows. The only time it was as low as 27 to 29 was in 2017 which is when a sector rotation occurred out of consumer discretionary stocks. The company's EPS was also significantly lower during this period as it hovered around the $2.30 mark, while today, that figure rests at $3.75. Consumer discretionary stocks are typically one of the first sectors to experience a contraction in value prior to a recession, so its sell-off could partially be explained by this despite the higher earnings per share.


Bearish Growth and EPS Estimates

One factor that's holding the stock back from reaching new heights is the contraction in its YoY and FWD revenue growth estimates. The company's revenues are currently growing at an anemic rate compared to the industry sector with 4.88% compared to the median of 20.27%. Its FWD revenue projections are also not holding up that much better, with 7.88% compared to the sector median of 13.87%. 

Some companies are performing much stronger than Nike on an FWD revenue basis, including Crocs (NASDAQ: CROX), with an FWD revenue projection of 41.27%. The company is also beating Nike on a 5-year revenue CAGR basis with 6.34% compared with 19.65%. 

Wall St seems to be in consensus with the bearish expectations for Nike over the short term for both its EPS and future revenues. Over the last three months, there have been 18 down EPS revisions and 26 down revenue revisions by analysts. Still, and perhaps due to the stock's deep discounting, the stock still holds a consensus buy recommendation from analysts, with 17 analysts giving it a strong buy recommendation and nine analysts giving it a buy recommendation. The stock is currently 24.4% below the MarketBeat consensus price target

Nike Has Strong Margins and Profitability

One of Nike's biggest positives is that it beats its competitors in terms of its margins and overall profitability. The company has a gross profit margin of 45.98%, while the sector lags at 37.05%. Other metrics such as its net income margin are also strong at 12.94% compared to just 6.56% for the sector.

Nike is also a cash-generating machine with a TTM cash from operations of 5.91B, while the sector only generates 130.72M. It's also relatively more efficient at generating value from its capital and assets, as its return on total capital is at 15.60% compared to 7.13%. Human capital is also a strength for the brand, as the net income per employee of Nike is 76.43K while the sector generates 14.83K per employee.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Crocs (CROX)
3.3675 of 5 stars
$74.01+0.5%N/A8.45Moderate Buy$94.25
Wolverine World Wide (WWW)
2.3744 of 5 stars
$23.56+2.8%1.70%50.13Hold$31.80
Compare These Stocks  Add These Stocks to My Watchlist 

10 Recession-Proof Stocks That Will Let You Wait Out the Bear

Whoever coined the expression that patience is a virtue probably never invested money in the equity markets. It can be excruciating to see a stock's price plummet. And that's particularly true when the stock was possibly at all-time highs just one year ago.

Here's the good news. In some cases, the reasons you liked the stock still exist. If that's true, then there's reason to believe that the stock price may recover.

The bad news is there's no way to know for sure when that will be. And anyone who says they do is not telling you the truth.

So what's an investor to do? We believe the answer is to be selective. And right now that means looking at best-in-class stocks that are built to ride out recessions.

In this special presentation, we'll give you seven stocks to consider as you look for safe stocks that give you an opportunity for growth and that pay a dividend for good measure. Here are the 7 recession-proof stocks that will let you wait out this bear market.

View the "10 Recession-Proof Stocks That Will Let You Wait Out the Bear".

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