Business analysis of Nike
Nike for the financial year ending May 31, 2017, reported a strong financial position of the company with asset base totaling $23.259 billion and total liabilities of $10.852 billion. The net profit of the company for the year increased by 12.8% to $4.24 billion compared to previous year. Revenues increased by 6.1% to $34.35 billion. The increase in profit and earnings per share seem to give confidence to the market and therefore expected appreciation in stock market price as further analyzed herein.
Stock earning estimate
The table below indicates Nike’s stock estimated earning per quarter.
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Currency is in US dollars |
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Estimated Earnings |
Current Quarter (November 2017) |
Next Quarter (February 2018) |
2018 |
2019 |
|
Highest estimate |
0.58 |
0.79 |
2.55 |
3 |
|
Lowest estimate |
0.35 |
0.63 |
2.19 |
2.4 |
|
Average estimate |
0.4 |
0.69 |
2.33 |
2.67 |
|
Earning per share of the previous year |
0.5 |
0.68 |
2.51 |
2.33 |
|
Numbers of the Analysts |
32 |
31 |
36 |
35 |
Figure: 1 shows the estimated EPS of Nike Stock in 2016, 2017, 2018 and 2019
Earnings per share is estimated to be 2.67 on average in the year 2019 therefore it is recommended that shareholders hold their stock for future benefit. Selling stocks the year 2018 will also be recommended for shareholders. Nike’s earning per share have been low in the year 2016.
Investors who have invested in Nike stocks should hold their stock to reap high in the future. The investors who are willing to venture in into the company’s stocks should do so in current quarter (November 2017) because this is the time when the stocks’ prices are low.
According to this analysis, the growth in the current quarter of November 2017, the stocks is estimated to go dip by -20% whereby in the next quarter there will be an estimated growth of 1.5%. In this year of 2017, the stocks have been experiencing a downfall of growth of Nike by -7.2% in the estimate, but in the 2018 year, it is estimated that the growth will experience a 14.6% growth which provides a good opportunity for investors to buy stocks now and sell them in 2018.
The price target range of the stock over the 12 months was low at 42 dollars and as high as 70 dollars. The Consensus Price Target was at 59 dollars, but the previous price closed at 66.6 dollars per share. The Consensus Price Target is termed as the individual target of price on average estimated and provided through covering analysts’ sell-side.
Stocks momentum is measured by dynamic changes of periodical sentiments of analysts, and it is used as future prices movement indicator. It is estimated that the momentum in the percentage mean of Earning Per Share of Nike Inc’s stocks in 2018, the month of May will be -0.44. The current quarter of November 2017’s estimated momentum is 2.28, but in the next one month, it will go up to 2.29.
In the year 2018, price per earnings ratio of Nike stocks will be 26.19 against the industry’s price per earning which will be estimated to be 16.6. The ratios show that the stock will do well in 2018. Price per earning ratios is used to evaluate or measure stocks (Nasdaq, 2017).
The PEG ratio of the stock is 2.8. The ratio is calculated by dividing the stock’s rate of growth with price earning ratio. In our case, the earnings forecast is done for the coming twelve months as well as the forecasted long-term rate of growth of the stock by professional analyst consensus. The price per earnings ratio of the stock is support to be equal to its rate of growth at 2.0 but in this case, it is projected to be 2.80 which shows that the price per earnings ratio will be more than the rate of growth of the stock.
The earnings growth of the Nike stock that is projected in May 2018 is -9.12% against the industry’s earning growth which stands at 3.0%. The earnings growth measures a year in year outgrowth of earning per share of a stock derived from a previous fiscal period or year. These ratios are expressed as percentages.
The forecasted Consensus earnings of Nike stock was reported to be 2.51 in May 2017 fiscal period. In the fiscal period of May 2018, the mean consensus earning is estimated to rise to 2.28, and this is as a result of a derivation of seventeen estimates. The rising average consensus growth of Nike stocks is a good indicator of good earnings from stocks held now.
In conclusion, it is recommended that the stock should experience a good purchase in this current quarter of November 2017 and the investors purchasing the stocks has speculative motive holding the stock for sale in the coming period of 2018. The reason why the stock should be held is that its value, earning per share and its price will rise in the year 2018 as estimated and projected by analysts.
Works cited
Nasdaq. Nike, Inc. Stock Research - Analyst Summary. 2017. Retrieved from; http://www.nasdaq.com/symbol/nke/analyst-research
Yahoo Finance. NIKE, Inc. (NKE): NYSE - NYSE Delayed Price. Currency in USD. 2017. Retrieved from; https://finance.yahoo.com/quote/NKE/analysts?p=NKE
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