Nike (NKE) Analysis

Nike is known around the world in the footwear business. However, it does business outside of the footwear business. Nike does business in the apparel and equipment arena in addition to the footwear business.

Nike has been growing at double digit rate for the past several quarters. In fiscal 2005, Footwear revenues were up 11% over last year. Apparel revenues were up 10%. Equipment revenues were up 15%. In the first two quarters of 2006, this trend has continued with revenues growing high single digits or low double digits. ( 8-12% range).

The Nike stock has also responded well jumping from around 40 at end of 2002 to about 80 now. Let us look at the balance sheets to see how things look and to see what management thinks about their earnings in the coming years.

Looking at the 10-Q from November, one can see that the profit margins increased to 13.2% from 12.8% from the comparable period last year. The operating expenses increased year over year but general and administrative expenses declined causing the operating profit margins to slighlty increase. The management estimates the operating margins to remain the same as last year.

The soccer world cup is scheduled for this year in Germany. It remains to be seen if this provides an upward push to the Nike revenues and earnings.

If analyst estimates hold up for Nike and it meets the EPS of 5.77/share in next fiscal year and the prospects continue to look good, if the P/E multiple holds up, the stock will go to $92.00. This is about 12% higher than where the stock is today.