Nike Finacial Analysis - published by formerly Indews Financial
The purpose of this paper is to provide investors with comprehensive information on Nike, its financial health and activities, its strength and weaknesses, and whether Nike creates value to its shareholders. This paper will analyze Nike's capital structure, scope of international operations, recent stock performance, and dividend policy. We will examine how Nike's international operations are conducted, its criticisms and strengths. Nike's debt ratios, dividend payout ratios, dividend yield, and interest coverage ratios over the previous 5 years will be discussed and compared with industry benchmarks. Its bond ratings and the relation between the operating characteristics and its leverage will also be analyzed.
Managers for Nike are creating value for shareholders by expanding Nike operations in foreign markets as much as possible. Nike's sales and earnings outpaced Wall Street estimates FY 06. Nike's sales reached $15 billion and its earnings per share were up 18%. Over the past 5 years, Nike's earnings per share on compounded rate were up 20%, gross margins averaged 42% and in the past year, Nike delivered 44% margins in a period of rising costs. The current managers are maximizing shareholder's wealth but in the footwear industry, Nike's performance still falls. The footwear industry averaged about 14.25%, while Nike's growth in stock was 10.48%. If the increase in value of shares is a benchmark of performance for managers, Nike's performance is unimpressive. Nike has a Price to Book (MRQ) ratio of 3.97, while the industry Nike competes in has a ratio of 3.96. S&P 500 has a Price to Book (MRQ) ratio of 3.90. Nike has a Price to Tangible Book (MRQ) ratio of 4.26, while the industry has a ratio of 4.44, and the S&P 500 has a ratio of 7.22.