Famous footwear manufacturer NIKE, Inc. (NKE) in Beaverton, Ore., designs, markets, and distributes athletic footwear, apparel, equipment, and accessories for sports and fitness activities. Its brand product offerings are Running, Basketball, the Jordan brand, Football, Training, and Sportswear.

On Dec.13, 2021, NKE announced the acquisition of RTFKT. NKE’s President and CEO John Donahoe said, “This acquisition is another step that accelerates Nike’s digital transformation and allows us to serve athletes and creators at the intersection of sport, creativity, gaming, and culture. Our plan is to invest in the RTFKT brand, serve and grow their innovative and creative community and extend Nike’s digital footprint and capabilities.”

NKE shares have declined 34.3% in price year-to-date and 36.1% over the past six months to close the last trading session at $109.37. It is currently trading 38.9% under its 52-week high of $179.10, which it hit on Nov. 5, 2021.

Here is what could influence NKE’s performance in the coming months:

Mixed Financials

NKE’s revenues increased 4.9% year-over-year to $10.87 billion for the third quarter ended Feb. 28, 2022. The company’s net income declined 3.6% year-over-year to $1.39 billion. Also, its EPS came in at $0.87, representing a 3.3% decrease year-over-year. In addition, its total selling and administrative expense increased 13% year-over-year to $3.43 billion.

Stretched Valuation

In terms of forward non-GAAP P/E, NKE’s 29.23x is 153.8% higher than the 11.51x industry average. And its 22.40x forward EV/EBITDA is 170.7% higher than the 8.27x industry average. Also, the stock’s 24.84x forward EV/EBIT is 127.1% higher than the 10.93x industry average.

Higher-than-industry Profitability

In terms of trailing-12-month gross profit margin, NKE’s 46.21% is 27.3% higher than the 36.28% industry average. And its 17.03% trailing-12-month EBITDA margin is 38.1% higher than the 12.33% industry average. Furthermore, the stock’s trailing-12-month EBIT margin of 15.40% is higher than the 9.14 % industry average.

Favorable Analyst Estimates

Analysts expect NKE’s EPS and revenue for its fiscal 2023 to increase 23.3% and 12%, respectively, year-over-year to $4.61 and $52.39 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its EPS increased 15.3% per annum over the next five years.

POWR Ratings Reflect Uncertainty

NKE has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. NKE has a D grade for Value, which is in sync with its 3.66x forward EV/S, which is  251.1% higher than the 1.04x industry average.

NKE is ranked #15 out of 37 stocks in the C-rated Athletics & Recreation industry. Click here to access NKE’s Growth, Momentum, Stability, and Sentiment ratings.

Bottom Line

NKE is currently trading below its 50-day and 200-day moving averages of $125.74 and $150.20, respectively, indicating a downtrend. Furthermore, the stock looks overvalued at its current price level. Thus, we think it could be wise to wait for a better entry point in the stock.

How Does NIKE, Inc. (NKE) Stack Up Against its Peers?

While NKE has an overall POWR Rating of C, one might want to consider investing in the following Athletics & Recreation stocks with a B (Buy) rating: MarineMax, Inc. (HZO), Vista Outdoor Inc. (VSTO), and Gaia, Inc. (GAIA).

NKE shares were trading at $108.21 per share on Thursday morning, down $1.16 (-1.06%). Year-to-date, NKE has declined -34.93%, versus a -17.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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