There are certain companies that you see and immediately realize their protective moat from competitors. This is a signal of a company that can give you a good shot at getting high profits over the years. Nike (NYSE:NKE) is a corporation that comes to mind. The athletic apparel company has been around since 1964, when it was known as Blue Ribbon Sports. Since then, it has established itself as one of the most prestigious companies in its industry. It has won a myriad of awards in its history, and managed to make the Swoosh one of the most prevalent symbols in our society.
But there's no disputing the success that Nike has achieved in the past. What is interesting is the company's bright future and current position. According to the S&P, it's got a 50% market share of the wholesale shoe market. One of its closest competitors, Under Armour (NYSE:UA), is respectable but not comparable to Nike. Under Armour has made a revenue of $1.73 billion for the trailing twelve months. Nike, on the other hand, enjoys a revenue of $25.12 billion. The company is simply a dominant force, and has a nice yield of 1.50% to go along with that. And for the future, analysts are optimistic with estimates of 10.37% per annum for the next five years.
Also, Nike became the official sponsor of the NFL in 2012. But the ambitions don't stop there. In June of 2011, the company held an investor meeting and raised the estimates of its 2015 revenue to $28-$30 billion from $27 billion. It will fight to achieve these goals with innovation and continued prestige in the industry. To see a company that offers a dividend and seems like a stable leader in its field is a great thing.
Trading at just under 25 times earnings, Nike is wonderfully priced for investors at around $55. It has a price/sales of 1.98 and a price/book of 4.97. Although the last reported earnings showed growth of -18.10%, the company is not doubted by many, as you can look down the balance sheets and income statements without seeing any particularly disruptive numbers. Even with this decrease in earnings, the revenue went up 7.40%. Nike also has an impressive debt to equity of 3.28, and it's got $3.52 billion of cash on hand.
There is no reason to complicate Nike's situation. Analyze every last detail if you want, but Nike is overall a solid company,and many investors have failed to recognize this. The undervalued company has associated itself with the likes of Michael Jordan, LeBron James, Maria Sharapova, and many other respectable athletes, recently agreeing to a contract with Rory McIlroy.
Nike has the clear advantage right now in the athletic apparel industry, and investors have a great opportunity to profit from its success.