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Essay

1153 words - 5 pages

Measure | NKE | ADDYY |
Return on Equity (ROE) | 24.75% | 14.67% |
Operating Margin | 13.55% | 8.09% |
Total Debt to Equity | 11.92 | 24.58 |
Current Ratio | 3.39 | 1.45 |
Trailing P/E Ratio | 25.27 | 21.55 |
VRE = ROE ÷ Trailing P/E Ratio | .009794 | .006807 |
Trailing Dividend Yield (%) | 1.20% | 1.60% |
PEG Ratio | 2.03 | -3.97 |
  | NKE | S&P 500 |
Jensen's Alpha | 1.18 |   |
Sharpe Ratio | 0.27 | 0.47 |
Treynor Ratio | 4.15 | 1.35 |
(NKE)
(NKE)
Stock Chart for the last 3 months
Stock Chart for the last 3 months
Performance Evaluation (Feb, 2012 -Jan, 2014)
Performance Evaluation (Feb, 2012 -Jan, 2014)
Key Statistics (Vs Major Competitor)
Key ...view middle of the document...

15 against S&P 500’s 1.35. The means that Nike has been able to earn a 4.15% risk premium for each systematic risk acquired.
News and Other Factors
On April 7th, 2014, Nike got a much needed boost on its stock shares from analysts. These analysts rated Nike shares from “hold” to “buy” which will help Nike shares this April since its stock value fell 7%. The reason Nike shares were at one of its lowest was due to a growing company named Under Armour. In fact, analysts predicted a bullish forecast for Under Armour for the year of 2014. Due to this, Nike which holds over 50% of the American shoe market is now suffering at the hands of these predictions. Numerous analysts have even declared that Nike is losing its touch with the youth. This can be seen in the younger generation being attracted to the Under Armour brand. Consequentially when Under Armour announced on March 28, 2014 that it would split its shares, Nike shares dropped value from around $80/share to $70/share around the first week of April.
Financial Ratios
Comparing Nike to its longtime competitor, Adidas, in regards to financial ratios is interesting. In assessing both companies’ current ratios, Nike has a higher ratio of 3.39. This means that Nike over Adidas is much more capable in meeting its short-term obligations with cash. On the other hand, Adidas’ PEG ratio makes the company look like an attractive investment opportunity. After all, the rule of thumb for PEG ratios is that if the company’s stock is less than 0.33, then it represents an extraordinary attractive investment opportunity. Thus Adidas’ PEG ratio of -3.97 over Nike’s 2.03 triumphs in attractiveness. Although, investors should not forget that Nike’s 2.03 PEG ratio makes the company fully valued. Another financial ratio to look into is both company’s total debt to equity ratio. Since Adidas has a higher ratio of 24.58, this illustrates that Adidas has been much more aggressive than Nike in financing its own growth with debt. Consequently, Adidas will have much more volatile earnings as a result of it. Granting, this will put Adidas in a position where it can earn more earnings which can benefit shareholders, but only if the earnings increases more than the interest acquired. This puts Nike when compared to Adidas in a position where the Nike company likes to play it safe in financing....

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