Nike Inc. Stock Buy Recommendation Reiterated (NKE)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Nike (NYSE: NKE) has been reiterated by TheStreet Ratings as a buy with a ratings score of A- . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • NKE's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NKE's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NKE has a quick ratio of 1.77, which demonstrates the ability of the company to cover short-term liquidity needs.
  • NIKE INC has improved earnings per share by 14.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NIKE INC increased its bottom line by earning $2.37 versus $2.20 in the prior year. This year, the market expects an improvement in earnings ($2.64 versus $2.37).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

NIKE, Inc., together with its subsidiaries, engages in the design, development, marketing, and sale of footwear, apparel, equipment, and accessories for men, women, and children worldwide. Nike has a market cap of $37.78 billion and is part of the consumer goods sector and consumer non-durables industry. The company has a P/E ratio of 22.2, above the S&P 500 P/E ratio of 17.7. Shares are up 1.5% year to date as of the close of trading on Friday.

You can view the full Nike Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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