Which stocks will continue to benefit from the global shift by consumers to live more healthy lifestyles?
Credit Suisse said its Healthy Living portfolio offers high quality returns with an average growth of 8% over the last 10 years. Additionally a "6% sales growth at sustained margins is priced in to all the stocks" within the portfolio. Stocks that have at least a "high, single-digit sales growth to 8.5%," along with "sustained margins at 14%," would warrant a 20% upside, in our view," the November 13 report said.
TheStreet highlighted only stocks in the Credit Suisse portfolio that are traded in the U.S., adding ratings from TheStreet ratings for another perspective on the stocks. Check out the list.
TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.NKE data by YCharts
1. Nike Inc. (NKE)
Industry: Consumer Goods & Services/Footwear
12-Month Revenue Growth: 7.71%
12-Month Net Income Growth: 21.34%
12-Month EPS Growth: 23.05%
NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories for men, women, and kids worldwide.
Credit Suisse Rating/Target Price: Outperform, $126
Exposure to Healthy Living Trend: 100%
Credit Suisse Said: Operationally, the business has developed a highly efficient marketing mechanism that spends over $3 billion a year to reinforce both the potential of sports as a lifestyle and Nike's role at the center of that lifestyle. This has allowed Nike to both build relevance for sports across geographies and capture market share from weaker players.
Ultimately, we believe that Nike will continue to capture market share at an elevated rate globally, positioning the company for a continuation of double-digit revenue growth. When combined with benefits from margin capture as sales shift to owned retail channels and price competition is alleviated across geographies, the company looks set to sustain mid-teens or better earnings growth for the next several years.
TheStreet Said: 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 solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 39.26% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NKE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- NIKE INC has improved earnings per share by 22.9% 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 $3.70 versus $2.98 in the prior year. This year, the market expects an improvement in earnings ($4.31 versus $3.70).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Textiles, Apparel & Luxury Goods industry average. The net income increased by 22.6% when compared to the same quarter one year prior, going from $962.00 million to $1,179.00 million.
- NKE's revenue growth trails the industry average of 15.9%. Since the same quarter one year prior, revenues slightly increased by 5.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NKE's debt-to-equity ratio is very low at 0.09 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 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: NKE