NKE Stock Report

2-Year Price History

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Ockham's Rating

NKE Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at NKE through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 1.69x and 1.15x respectively.

Utilizing this range we can see that NKE’s current Price to Sales per share ratio of 1.18x is significantly below its average levels historically. In fact, with a current price of $51.06, NKE is a full 18% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for NKE.

NKE Cash Earnings

As a value investment framework, Ockham Research is similar to a private equity firm in terms of our valuation methods. We are always on the lookout for value in the form of sales and cash numbers. In the case of NKE, Ockham views their current Cash Earnings as below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from NKE. For example, NKE's Cash Earnings ratio per share has fluctuated between 10.63 and 15.73 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where NKE is with respect to prior business periods.

So what does a Cash Earnings ratio below the historical norm mean for NKE? Generally, NKE's investors have paid slightly higher stock prices for this level of Cash Earnings, which bodes well as a return to historical norms is statistically likely. However, it is never a guarantee that history gives us proper direction, particularly in fluctuating market cycles. So by utilizing a long term view and incorporating other areas of analysis (like Sales, Dividends, and management analysis), each investor can gain a more complete view of NKE. Remember, that the average Cash Earnings level for NKE has been 13.18, so the current Cash Earnings level of 12.61 is a positive in our view, but by no means is it overwhelming.

NKE Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In NKE’s case, the estimated annual dividend is $1.00 resulting in a current dividend yield of 1.96%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from NKE against the historic high and low levels over the past 10 years. The highest dividend yield from NKE over this period was 2.62% while the lowest dividend yield was 0.75% It's hard not to notice that NKE pays a current dividend yield that is 16.32% above the historical median. This peaks our interest since our analysis is looks favorably upon dividend yields that are greater than the historical median.