NEW YORK (TheStreet) -- Nike (NKE) shares are now at an all-time high after the stock closed at $89.50 on Friday. Shares are up 13.8% for the year to date, almost doubling the 7.3% gain in the S&P 500 (SPY) .
Why? Nike delivered an earnings slam dunk. On the heels of the company's strong fiscal first-quarter results, in which revenue was up across all categories, investors on the sidelines have a decision to make. These shares, which are already trading at a premium price-to-earnings ratio of 29 vs. the industry average P/E of 18, won't get cheap any time soon. But it's still not too late to add to a long-term position.
And here's why Nike remains a strong buy.
Aside from being a consistently safe investment, Nike pays a decent yield of 1.1%. And at $89.50, Nike shares have only reached their median analyst target, according Yahoo! Finance. Nike shares have a high price target of $100 among the 23 analysts that cover the company, which suggests a premium of close to 15%.
Following the company's 14.5% year-over-year jump in revenue, which beat estimates by $150 million, analysts will have to revise upward. Despite stiff competition from Adidas (ADDYY) and Under Armour (UA) , Nike is showing no meaningful signs of slowing down.
Nike has been and always will remain a strong global brand. The company has outlined long-term growth strategies that imply no market share loss in any of its categories. And Nike estimates that it will grow fiscal 2015 revenue to $30 billion. It also expects to grow revenue at an annual rate of 10% over the next two years, building to revenue of $36 billion in 2017.
In the process, Nike expects to produce huge earnings per share. The company is only two quarters removed from posting a 5% jump in earnings. Now it expects to reach double digits -- the mid-teens. Given Nike's size, with an almost $80 billion market cap, these are aggressive targets.
While Nike does have a strong operational focus, including operating margin that is five points higher than the industry average, this drastic jump in earnings in only a few quarters will be a challenge.
To that end, investors should expect the company to remain aggressive in its share repurchase program. Over the past decade, the company has bought back around 15% of its stock. To achieve its high earnings-per-share goal, even more buybacks seem likely. And that's more reason for investors to buy the stock now.
Nike is performing well today in footwear against the likes of Skechers (SKX) and New Balance. Yet Nike still has not reached its full potential. It has opportunities to lead in apparel and take share from Lululemon (LULU) , among others. The company just hasn't made that the focus yet. But it's only a matter of time.
For now, investors who kicked Nike to the curb when the World Cup ended should be kicking themselves. But as Nike's slogan suggests, "Just do it." There's no point in crying over spilled milk. Just buy the stock.
At the time of publication, the author held no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates NIKE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NIKE INC (NKE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, notable return on equity, increase in stock price during the past year and growth in earnings per share. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
You can view the full analysis from the report here: NKE Ratings Report