Nike (NKE) stock is trading around $97.75 versus its 52-week range of $85.10-$114.81, up 9% for the year. The stock is trading with a P/E multiple of 19 times, and a forward multiple of 16.5 times. Historically, the stock has traded within a range of 15-20 times forward P/E. The company recently reported Q1 2013 earnings of $1.27 -- ahead of the consensus of $1.12 -- driven by higher sales and improving operating expenses. Although Europe and the emerging markets were weak, sales of $9 billion in North America compensated for the losses.
As of June 30, 2012, top institutional holders of Nike stock are The Vanguard Group (5%), FMR, LLC (5%), Capital Research Global Investors (4%), Bank of New York Mellon (3%), and BlackRock Institutional (3%).
Positive Catalysts For The Fundamentals
Nike maintains a strong balance sheet, with $3.2 billion in cash and short-term investments. The short-term investments consist of U.S. treasury securities and commercial paper. The company does not have any public debt.
Nike has continued to buy back stock. During Q1 2013, the company bought 8.2 million shares at an average price of $95. Also, the company has a new $8 billion stock buyback program in place. The share buybacks have provided a floor for the stock.
The stock currently yields 1.5% with a 5-year dividend growth of 15%. Nike increased the dividend in November 2011, and an additional dividend increase will come as no surprise to investors.
Negative Catalysts For The Fundamentals
China has been an overhang on Nike's earnings potential with a slowing economy and a change in consumer preferences. This geography will continue to weigh on the shares until a steady improvement is experienced.
"Futures" orders have continued to slow, coming in at 6% last quarter, which is the smallest gain in about two years. Clearly, this has been impacted by the sluggishness in China. "Futures" have remained strong in Europe, North America, and the emerging markets, all of which provide downside protection for the stock.
An additional factor impacting the performance of the stock is the weak euro. This has had a direct impact on Nike's margins and earnings.
In conclusion, China does remain a risk for Nike, but the company has shown strong earnings potential, and a possibility of a dividend increase is a fair expectation.
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Written by Kapitall's Sabina Bhatia. Tool provided by Kapitall.