uploads///NKE Valuation

Gauging Nike’s Valuation after Its Q3 Results


Dec. 4 2020, Updated 10:53 a.m. ET

Valuation down after the results

Nike (NKE) was trading at a 12-month forward PE of 27.7x as of March 25. The company’s forward valuation multiple fell 3.6% on March 22 in reaction to a lower-than-expected revenue outlook for fiscal 2019’s fourth quarter.

With the exception of Skechers (SKX), Nike is trading at a lower valuation than its peers in the footwear and sportswear space. As of March 25, Lululemon (LULU), Under Armour (UAA), Skechers, and Columbia Sportswear (COLM) were trading at 12-month forward PEs of 33.3x, 56.3x, 14.4x, and 22.8x, respectively.

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Strong growth prospects

Nike expects the momentum in North America to continue, backed by innovation and digital sales. Nike is also focusing on expanding its female customer base by offering innovative products across categories like plus-size bras and athletic wear.

The company sees tremendous opportunity to expand in international markets. In particular, Nike is keen on expanding its presence in China to capitalize on double-digit growth in the athletic footwear and apparel space in the Chinese market and a growing interest in sports. Nike is focusing on creating products tailored to Chinese customer preferences.

Nike will continue to strive for growth across all its geographies through its Consumer Direct Offense strategic plan. Under this plan, Nike is aggressively investing in innovation, cutting down its product creation cycle, and increasing its speed to market as well as enhancing sales from its digital channels.

Analysts expect Nike’s revenue to rise 7.5% to $39.1 billion and its adjusted EPS to grow 7.5% to $2.57 in fiscal 2019, which ends on May 31, 2019. Currently, analysts expect Nike’s adjusted EPS to grow 19% to $3.06 on revenue growth of 8.2% to $42.3 billion in fiscal 2020.


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