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NEW YORK ( F.A.S.T. Graphs) -- Recently, I happened upon an excerpt of TheStreet.com founder Jim Cramer's CNBC show "Mad Money." Specifically, I'm referencing the "Lightning Round" segment on Aug. 26.
The first question was about
Nike(NKE - Get Report), to which Cramer replied: "I like Nike. I like Under Armour even better."
Now, the second bit about
Under Armour(UA) might very well be true, but I'd like to investigate the Nike comment a touch more. I'm guessing Cramer and I share a similar view on this subject, but I also believe that it's important to decipher the difference between a good company and a good investment.
Just because someone says they like or don't like something doesn't mean that you can substitute that for proper due diligence. It's always good to double-check what you're hearing. Even within this article, there are many more items that you would probably want to investigate.
The first thing that I would check when looking into Nike is the company's business results.
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One of the easiest -- and, in my view, most efficient -- ways to do is by utilizing the fundamental analyzer software tool of
F.A.S.T. Graphs. Here we see that Nike was able to grow earnings by about 13% a year (orange line). In addition, we can also see that dividends (pink line and blue shaded area) have begun to increase at a steady rate.
In turn, shareholdings were rewarded for holding a good company whose business performed well. Total shareholder returns compounded at an annual rate of almost 14%, trouncing the
S&P 500 during the same period and basically mirroring Nike's business results.
Further, it's really not much of a secret why NKE was able to provide such steady business results. If we take a look at the Fundamental Underlying Numbers (FUN) Graphs, we see that Nike has had steady gross profit margins along with net profit margins. People are consistently willing to pay a premium for having a swoosh embroidered on their apparel versus sporting a "non-check mark" alternative. Additionally, it should be noted that the consistency of margins is perhaps more relevant than their growth. Growing margins would be great, but once a company is churning out profits, sustainability is paramount.