Nike: Shopping for Value

04/11/2016 8:00 am EST


Our latest featured low risk recommendation is a firm that designs, markets and sells athletic footwear, apparel, equipment, and accessories, suggests Roy Ward, editor of Cabot Benjamin Graham Value Investor.

Nike (NKE) is the global leader in athletic footwear and apparel with operations in over 160 countries. Nike’s “swoosh” logo and “just do it” tagline are widely recognized around the world.

The company markets its products to men, women and children, and also for other athletic and recreational uses. Its portfolio brands include the NIKE Brand, Jordan Brand, Hurley and Converse.

Nike has contracts for supplying the official uniforms and apparel for the National Basketball Association and National Football League.

The company’s association with celebrity sportspersons, such as Michael Jordon and Roger Federer -- as well as top professional and college teams -- ensures top-notch name recognition for the future.

Nike recently announced its creation of a self-lacing athletic shoe. The sensor system will automatically tighten the shoe and maintain consistent pressure, set by the wearer.

The shoe, dubbed the Nike HyperAdapt 1.0, is due to go on sale before Christmas 2016 and could be another big hit for the company.

At 29.2 times current EPS, NKE shares are not cheap, but sales and earnings growth will likely accelerate in 2016.

The balance sheet is solid, and the dividend has been increased almost every year by more than 10% during the past decade.

Dividend increases will likely average 20% annually during the next five years. NKE has declined 10% from its 52-week high.

I expect NKE to climb 37% to reach my minimum sell price of $84.52 within 12 months. Buy at $62.23 or below.

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By Roy Ward, Editor of Cabot Benjamin Graham Value Investor

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