Nike Inc (NKE, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $93.95, Nike Inc has witnessed a daily loss of 1.75%, marked against a three-month change of -14.34%. A thorough analysis, underlined by the GF Score, suggests that Nike Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of Nike Inc's GF Score:
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 10/10
- Momentum rank: 5/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, and a decent momentum rank, GuruFocus assigned Nike Inc the GF Score of 97 out of 100, which signals the highest outperformance potential.
Understanding Nike Inc's Business
Nike Inc, with a market cap of $143.74 billion, is the largest athletic footwear and apparel brand in the world. Key categories include basketball, running, and football (soccer). Footwear generates about two thirds of its sales. Its brands include Nike, Jordan, and Converse (casual footwear). Nike sells products worldwide through company-owned stores, franchised stores, and third-party retailers. The firm also operates e-commerce platforms in more than 40 countries. Nearly all its production is outsourced to contract manufacturers in more than 30 countries. Nike was founded in 1964 and is based in Beaverton, Oregon.
Financial Strength Breakdown
According to the Financial Strength rating, Nike Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure.
The Interest Coverage ratio for Nike Inc stands impressively at 364, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-Score of 6.2, Nike Inc exhibits a strong defense against financial distress, highlighting its robust financial stability.
With a favorable Debt-to-Revenue ratio of 0.24, Nike Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Nike Inc's impressive standing among its peers in generating profit.
The Piotroski F-Score confirms Nike Inc's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency.
Nike Inc's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Nike Inc demonstrates a strong commitment to expanding its business.
The company's 3-Year Revenue Growth Rate is 11.6%, which outperforms better than 75.1% of 1008 companies in the Manufacturing - Apparel & Accessories industry
Moreover, Nike Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 17.5, and the rate over the past five years is 9.3. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Nike Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. This analysis underscores the importance of comprehensive financial evaluation in making informed investment decisions. With a GF Score of 97, Nike Inc stands as a promising investment opportunity for value investors.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
