nike (nke 2.75%) has not had the start to 2022 that it hoped for. Production restrictions and problems in China have affected the company’s finances in recent quarters. As a result, shares of the sportswear giant have sunk 18% year-to-date, considerably more than the S&P 500, which has fallen 6.6% over the same period.
Nike’s latest share price drop has created a nice window of opportunity for investors to buy shares in one of the world’s top companies at a discount. Stocks are likely to continue to face downward pressure for the foreseeable future, but the current headwinds are largely short-term in nature. As Nike ramps up its digital sales and concerns about China subside, the company is well-equipped to deliver big success in the years to come.
Reading: Is nike a good stock to buy right now
the power of nike is consistency
Never underestimate the power of a brand. The Nike brand allows the retailer to consistently generate strong financials. Even during a period when it is facing temporary factory closures related to the pandemic and concerns around sales in China, the company continues to deliver for its shareholders. In the third quarter of fiscal 2022 (ending February 28), Nike reported a top line of $10.9 billion and earnings of $0.87 per share, beating wall street estimates by 3% and 21%, respectively. .
outperformance comes even after quarterly sales in china declined 8% year over year. Investors should be optimistic about Nike’s future in Asia. Management indicated on its previous earnings call that it expects to see a sequential improvement in Greater China in the fourth quarter. The company’s below-average third-quarter revenue from China was offset by strong digital sales, which were up 22% year-over-year, primarily driven by 33% growth in North America.
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nike’s third quarter performance showed the company’s ability to navigate volatility and manage headwinds effectively. In today’s uncertain market, Nike offers investors reliability coupled with strong upside potential.
Investors can look forward to another fruitful year from Nike in fiscal 2022 (ending May 31). The analyst consensus forecast calls for full-year revenue of $46.9 billion and EPS of $3.74, which translates to 5% growth for both metrics. These may not seem like amazing results, but they are impressive given the company’s comparables in 2021. Due to the pains of covid-19 in 2020, fiscal year 2021 (ended May 31, 2021) revenue and earnings increased by 19% and 92%, respectively. Therefore, Nike’s ability to increase both profits and profits this coming year would be a worthwhile achievement.
nike has an increasingly attractive valuation
The most recent drop in the company’s share price has caught my attention. nike is trading at 35 times earnings today, below the company’s five-year average price-to-earnings (p/e) multiple of 43. it was trading above its historical average at the beginning of the year, but the p/e e has contracted rapidly, which leads me to believe that now is a good time to buy stocks.
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ratio p/e nke. data by ycharts.
Analysts are modeling Nike’s EPS to hit $6.20 by fiscal 2025, meaning it is trading at just 22 times consensus estimates for that year. this seems awfully cheap for one of the world’s most successful companies. it also reveals the beauty of long-term investing and how an extended time horizon can help us gain a better perspective on the value of stock prices today.
consider nike stock at these levels
The company has all the tools available to maintain stable long-term success, all while developing a broad path of growth. Investors should take note amid its recent pullback: Nike is now trading below its five-year average P/E multiple and may continue to remain at these levels for a while.
nike offers investors a triple threat with solid financials, an attractive valuation and an unmatched brand image. that’s what appeals to me today, and I think other investors should tune in as well.
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