Why Nike is a Better-Than-Average Equity Market Performer

When asked how to sum up Nike’s culture, Brandon Burrough, Nike’s product manager, simply stated, “One of my fears is being this big, slow, constipated, bureaucratic company that’s happy with its success.”

Innovative would be one way to describe Nike. When asked to describe Nike’s future, CEO Mark Parker states, “Just imagine if your body could control or change the music that you’re listening to–if your movement could actually change the cadence of the music, the tempo, or the beat. Sound–there’s a lot of things going on in that area that are very exciting … So there could be new ways to get feedback–through audio feedback–for how your body is performing. The same could happen with heart rate.” Read more:  http://www.nasdaq.com/article/six-reasons-to-buy-nike-stock-for-long-term-gains-analyst-blog-cm362079#ixzz41fFTc677

Nike, a vying and ever-growing contender in this free-market economy, has aways been on the cutting edge of design, technology, and advertising. Nike’s gross income in 2015? 13.49 billion.

nike growth

Everyone aspires to be fit, fashionable, and healthy. Creating a need for Nike products is virtually effortless; the product sells itself. Provided Nike keeps growing in the unprecedented direction they already have and continues to employ extremely talented publicists and designers, Nike will be well on its way to monopolizing the fitness industry; not only with its athletic wear and state-of-the-art technology, but with fitness fashion as well.

Nike truly seeks to expand beyond its core competency; an important characteristic of a company worthy of investment.

What makes Nike stand apart from other athletic apparel brands, according to Nasdaq.com, “Nike is on the cutting edge when it comes to the digital transformation of the physical world. As Forrester Research analyst Sarah Rotman Epps put it, “Nike has broken out of apparel and into tech, data, and services, which is so hard for any company to do.”

Annual Financials for Nike Inc.

Fiscal year is June-May. All values USD millions. 2011 2012 2013 2014 2015
 Sales/Revenue 20.89B 24.12B 25.33B 27.79B 30.7B
 Cost of Goods Sold (COGS) incl. D&A 11.47B 13.62B 14.41B 15.34B 16.75B
COGS excluding D&A 11.12B 13.23B 13.95B 14.82B 16.15B
Depreciation & Amortization Expense 351M 395M 452M 518M 606M
Depreciation 335M 373M 438M 518M 606M
Amortization of Intangibles 16M 22M 14M
 Gross Income 9.42B 10.5B 10.93B 12.44B 13.94B

Being well-rounded is just one trait that instils confidence in investors. With a steady growth chart, Nike also exemplifies long-term viability. In terms of size and product, Nike has a higher profit than any other company in it’s class. It also doesn’t hurt that Nike’s business model is simple to understand:

According to Nike Inc., “Our vision for SB&I is to enable NIKE, Inc. and our consumers to thrive in a sustainable economy, one where people, planet and profit are in balance. To do this, we will:

  • Innovate to deliver enterprise-level sustainability solutions
  • Integrate sustainability into the heart of the NIKE, Inc. business model
  • Mobilize key constituents (civil society, employees, consumers, government and industry) to partner in scaling solutions”

nikelab-x158-01

What also makes Nike so successful is that it’s athletic and fashion branding has a global reach. When you are looking to invest in something, isn’t global growth key? In regards to Nike’s business model as a sustainable and innovative platform, Nike Inc. stated, “We completed a major reorganization at the end of FY09 and emerged a flatter, simpler organization aligned across geographies, categories, functions and retail.”

 

That is clean, powerful global growth.

Just Do It.

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