07-27-2016, 06:38 PM
Is Nike Worthy Of A Spot In An IRA At These Levels
Nike Inc (NYSE:NKE) designs, develops and markets footwear, apparel, equipment, and accessory products. It is a seller of athletic footwear and athletic apparel. It sells its products through NIKE owned in line and factory retail stores and internet websites. On September 25, 2014, the company reported fiscal first quarter earnings of $1.09 per share, which beat the consensus of analysts' estimates by $0.21. In the past year, the company's stock is up 24.48% excluding dividends (up 25.7% including dividends) and is beating the S 500, which has gained 14.86% in the same time frame. I am taking my IRA back from my financial advisor who has managed to not make as much money as the market has and I've decided that I want to look at Nike as a potential investment. With all this in mind, I'd like to take a moment to evaluate the stock to see if right now is a good time to purchase shares for the consumer goods sector of my IRA portfolio.
The company currently trades at a trailing 12 month P/E ratio of 29.5, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1 year forward looking P/E ratio of 22.94 is currently fairly priced for the future in terms of the right here, right now. The 1 year PEG ratio (2.03), which measures the ratio of the price you're currently paying for the trailing 12 month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1 year horizon), tells me that the company is expensively priced based on a 1 year EPS growth rate of 14.54%. The company has great near term future earnings growth potential with a projected EPS growth rate of 14.54%. In addition, the company has great long term future earnings growth potential with a projected EPS growth rate of 13.34%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 1.01% with a payout ratio of 30% of trailing 12 month earnings while sporting Nike Air Max 2016 return on assets, equity and investment values of 15.8%, 25.9% and 23.2%, respectively, which are all respectable values.
The really high return on assets value (15.8%) is important because it is a measure of how profitable the company is relative to its assets, telling us how efficient a management team is at using its assets to generate earnings [for comparison purposes, Nike Air Max 90 Nike has the second highest ROA of all companies in the textile apparel footwear accessories industry, trailing Coach, Inc. (NYSE:COH), which sports an ROA of 18.9%, and ahead of Steve Madden, Ltd. (NASDAQ:SHOO), which sports an ROA of 14.8%].
Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 1.01% yield of this company alone is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 12 years at a 5 year dividend growth rate of 12.3%.
Click to enlargeLooking first at the relative strength index chart [RSI] at the top, I see the stock in overbought territory with a current value of 73.73. I will look at the moving average convergence divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars flattening in height which tells me bullish momentum in the name is getting tired. As for the stock price itself ($94.68), I'm looking at $96.79 to act as resistance and $90.32 to act as support for a risk/reward ratio which plays Nike Air Max 90 out to be 4.6% to 2.23%.
There is no doubt that Nike has been on an absolute tear since late September thanks to a great earnings report. Fundamentally I believe the company to be fairly valued on next year's earnings estimates and expensive on earnings growth potential. Financially, the dividend is tiny and does have a lot of room to grow. On a technical basis the risk/reward ratio shows me there is more risk than reward right now. It's too bad I didn't get a chance to look at this name back in early September rather than early November, because the stock has just run away to the up side. I'm going to have to take a pass on this name for the IRA when it gets funded unless it begins to drop in price.
Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework.
Nike Inc (NYSE:NKE) designs, develops and markets footwear, apparel, equipment, and accessory products. It is a seller of athletic footwear and athletic apparel. It sells its products through NIKE owned in line and factory retail stores and internet websites. On September 25, 2014, the company reported fiscal first quarter earnings of $1.09 per share, which beat the consensus of analysts' estimates by $0.21. In the past year, the company's stock is up 24.48% excluding dividends (up 25.7% including dividends) and is beating the S 500, which has gained 14.86% in the same time frame. I am taking my IRA back from my financial advisor who has managed to not make as much money as the market has and I've decided that I want to look at Nike as a potential investment. With all this in mind, I'd like to take a moment to evaluate the stock to see if right now is a good time to purchase shares for the consumer goods sector of my IRA portfolio.
The company currently trades at a trailing 12 month P/E ratio of 29.5, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1 year forward looking P/E ratio of 22.94 is currently fairly priced for the future in terms of the right here, right now. The 1 year PEG ratio (2.03), which measures the ratio of the price you're currently paying for the trailing 12 month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1 year horizon), tells me that the company is expensively priced based on a 1 year EPS growth rate of 14.54%. The company has great near term future earnings growth potential with a projected EPS growth rate of 14.54%. In addition, the company has great long term future earnings growth potential with a projected EPS growth rate of 13.34%.
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 1.01% with a payout ratio of 30% of trailing 12 month earnings while sporting Nike Air Max 2016 return on assets, equity and investment values of 15.8%, 25.9% and 23.2%, respectively, which are all respectable values.
The really high return on assets value (15.8%) is important because it is a measure of how profitable the company is relative to its assets, telling us how efficient a management team is at using its assets to generate earnings [for comparison purposes, Nike Air Max 90 Nike has the second highest ROA of all companies in the textile apparel footwear accessories industry, trailing Coach, Inc. (NYSE:COH), which sports an ROA of 18.9%, and ahead of Steve Madden, Ltd. (NASDAQ:SHOO), which sports an ROA of 14.8%].
Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 1.01% yield of this company alone is good enough for me to take shelter in for the time being. The company has been increasing its dividends for the past 12 years at a 5 year dividend growth rate of 12.3%.
Click to enlargeLooking first at the relative strength index chart [RSI] at the top, I see the stock in overbought territory with a current value of 73.73. I will look at the moving average convergence divergence [MACD] chart next. I see that the black line is above the red line with the divergence bars flattening in height which tells me bullish momentum in the name is getting tired. As for the stock price itself ($94.68), I'm looking at $96.79 to act as resistance and $90.32 to act as support for a risk/reward ratio which plays Nike Air Max 90 out to be 4.6% to 2.23%.
There is no doubt that Nike has been on an absolute tear since late September thanks to a great earnings report. Fundamentally I believe the company to be fairly valued on next year's earnings estimates and expensive on earnings growth potential. Financially, the dividend is tiny and does have a lot of room to grow. On a technical basis the risk/reward ratio shows me there is more risk than reward right now. It's too bad I didn't get a chance to look at this name back in early September rather than early November, because the stock has just run away to the up side. I'm going to have to take a pass on this name for the IRA when it gets funded unless it begins to drop in price.
Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework.