Nike (NKE - Free Report) has been an iconic brand and leader in retail apparel for many years. Often, the first company that comes to mind when consumers think of buying shoes is Nike.
With Nike shares still trading 37% from their highs, now might be a great time for investors to consider buying NKE for 2023 and beyond. Going over Nike’s fundamentals will help gauge if a rebound is in store.
Recent Performance
The Zacks Shoe & Retail Apparel Industry is down -32% in 2022, with some of the most notable names in the space being Nike, Adidas (ADDYY - Free Report) , and Skechers (SKY - Free Report) . Nike’s -36% YTD performance is right in the middle of its popular peers, beating Adidas’s -56% but lagging Skechers -4%.
Nike’s total return is +76% over the last five years, to beat Skecher’s +10% and Adidas’s -38%. This also topped the Shoes & Retail Apparel Markets +48% and the benchmark.
Checking Nike’s valuation over this period may give a better indication of if now is a great long-term buying opportunity or not.
Valuation
Nike shares currently trade at 37.5X forward earnings at around $108 a share. This is a 31% discount from its five-year high of 54.3X and closer to the median of 32.6X.
From a price-to-earnings perspective, NKE’s valuation is starting to look intriguing. Investors may want to also gauge the price to sales they pay for retail and apparel stocks as well. In this regard, Nike looks attractive as well as there is not a high premium being paid for shares of the industry leader.
NKE trades at 3.7X P/S which is 41% below its five-year high of 6.5X and right at the median. Even better, Nike trades modestly above the current industry average of 3.3X and not at a far-stretched premium.
Growth & Outlook
Nike earnings are expected to drop -21% in its current fiscal 2023 at $2.97 per share. FY24 EPS is expected to rebound and jump 26% to $3.76 per share. It is important to note that estimate revisions have declined over the last 90 days for both FY23 and FY24.
Sales are forecasted to rise 5% in FY23 and another 8% in FY24 to $52.92 billion. FY24 sales would represent 35% growth from pre-pandemic levels with 2019 sales at $39.11 billion.
Considering its valuation, from a growth perspective Nike could be poised for a 2023 rebound despite dealing with a tougher operating environment for most companies.
Bottom Line
Nike stock currently lands a Zacks Rank #3 (Hold). Investors may be rewarded for holding the stock with shares starting to look attractive from a valuation standpoint. Growth is also expected to continue as the company adjusts to the economic downturn.
Plus, Nike has a strong balance sheet and offers a modest 1.2% annual dividend yield to support its shareholders. The average Zacks Price target suggests 6% upside from current levels.
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Nike (NKE - Free Report) has been an iconic brand and leader in retail apparel for many years. Often, the first company that comes to mind when consumers think of buying shoes is Nike.
With Nike shares still trading 37% from their highs, now might be a great time for investors to consider buying NKE for 2023 and beyond. Going over Nike’s fundamentals will help gauge if a rebound is in store.
Recent Performance
The Zacks Shoe & Retail Apparel Industry is down -32% in 2022, with some of the most notable names in the space being Nike, Adidas (ADDYY - Free Report) , and Skechers (SKY - Free Report) . Nike’s -36% YTD performance is right in the middle of its popular peers, beating Adidas’s -56% but lagging Skechers -4%.
Nike’s total return is +76% over the last five years, to beat Skecher’s +10% and Adidas’s -38%. This also topped the Shoes & Retail Apparel Markets +48% and the benchmark.
Checking Nike’s valuation over this period may give a better indication of if now is a great long-term buying opportunity or not.
Valuation
Nike shares currently trade at 37.5X forward earnings at around $108 a share. This is a 31% discount from its five-year high of 54.3X and closer to the median of 32.6X.
From a price-to-earnings perspective, NKE’s valuation is starting to look intriguing. Investors may want to also gauge the price to sales they pay for retail and apparel stocks as well. In this regard, Nike looks attractive as well as there is not a high premium being paid for shares of the industry leader.
NKE trades at 3.7X P/S which is 41% below its five-year high of 6.5X and right at the median. Even better, Nike trades modestly above the current industry average of 3.3X and not at a far-stretched premium.
Growth & Outlook
Nike earnings are expected to drop -21% in its current fiscal 2023 at $2.97 per share. FY24 EPS is expected to rebound and jump 26% to $3.76 per share. It is important to note that estimate revisions have declined over the last 90 days for both FY23 and FY24.
Sales are forecasted to rise 5% in FY23 and another 8% in FY24 to $52.92 billion. FY24 sales would represent 35% growth from pre-pandemic levels with 2019 sales at $39.11 billion.
Considering its valuation, from a growth perspective Nike could be poised for a 2023 rebound despite dealing with a tougher operating environment for most companies.
Bottom Line
Nike stock currently lands a Zacks Rank #3 (Hold). Investors may be rewarded for holding the stock with shares starting to look attractive from a valuation standpoint. Growth is also expected to continue as the company adjusts to the economic downturn.
Plus, Nike has a strong balance sheet and offers a modest 1.2% annual dividend yield to support its shareholders. The average Zacks Price target suggests 6% upside from current levels.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.2% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>
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