VALUE—NIKE, INC.
Selected data from Nike’s financial statements for the period 2005–2009 follow:
|
Item 6 Selected Financial Data (In Part) |
|||||
|
Year Ended May 31, |
2009 |
2008 |
2007 |
2006 |
2005 |
|
(In millions, except per share data and financial ratios)1 |
|||||
|
Revenues |
$19,176.10 |
$18,627.00 |
$16,325.90 |
$14,954.90 |
$13,739.70 |
|
Gross margin |
8,604.40 |
8,387.40 |
7,160.50 |
6,587.90 |
6,115.40 |
|
Gross margin % |
44.90% |
45.00% |
43.90% |
44.00% |
44.50% |
|
Restructuring charges |
195 |
— |
— |
— |
— |
|
Goodwill impairment |
199.3 |
— |
— |
— |
— |
|
Intangible and other asset impairment |
202 |
— |
— |
— |
— |
|
Net income |
1,486.70 |
1,883.40 |
1,491,5 |
1,392.00 |
1,211.60 |
|
Basic earnings per common share |
3.07 |
3.8 |
2.96 |
2.69 |
2.31 |
|
Diluted earnings per common share |
3.03 |
3.74 |
2.93 |
2.64 |
2.24 |
|
Weighted average common shares outstanding |
484.9 |
495.6 |
503.8 |
518 |
525.2 |
|
Diluted weighted average common shares outstanding |
490.7 |
504.1 |
509.9 |
527.6 |
540.6 |
|
Cash dividends declared per common share |
0.98 |
0.875 |
0.71 |
0.59 |
0.475 |
|
Cash flow from operations |
1,736.10 |
1,936.30 |
1,878.70 |
1,667.90 |
1,570.70 |
|
Price range of common stock |
|||||
|
High |
70.28 |
70.6 |
57.12 |
45.77 |
46.22 |
|
Low |
38.24 |
51.5 |
37.76 |
38.27 |
34.31 |
|
At May 31, |
|||||
|
Cash and equivalents |
$2,291.10 |
$2,133.90 |
$1,856.70 |
$954.20 |
$1,388.10 |
|
Short term investments |
1,164.00 |
642.2 |
990.3 |
1,348.80 |
436.6 |
|
Inventories |
2,357.00 |
2,438.40 |
2,121.90 |
2,076.70 |
1,811.10 |
|
Working capital |
6,457.00 |
5,517.80 |
5,492.50 |
4,733.60 |
4,339.70 |
|
Total assets |
13,249.60 |
12,442.70 |
10,688.30 |
9,869.60 |
8,793.60 |
|
Long term debt |
437.2 |
441.1 |
409.9 |
410.7 |
687.3 |
|
Redeemable Preferred Stock |
0.3 |
0.3 |
0.3 |
0.3 |
0.3 |
|
Shareholders’ equity |
8,693.10 |
7,825.30 |
7,025.40 |
6,285.20 |
5,644.20 |
|
Year end stock price |
57.05 |
68.37 |
56.75 |
40.16 |
41.1 |
|
Market capitalization |
27,697.80 |
33,576.50 |
28,472.30 |
20,564.50 |
21,462.30 |
|
Financial Ratios: |
|||||
|
Return on equity |
18.00% |
25.40% |
22.40% |
23.30% |
23.20% |
|
Return on assets |
11.60% |
16.30% |
14.50% |
14.90% |
14.50% |
|
Inventory turns |
4.4 |
4.5 |
4.4 |
4.3 |
4.4 |
|
Current ratio at May 31 |
3 |
2.7 |
3.1 |
2.8 |
3.2 |
|
Price/Earnings ratio at May 31 |
18.8 |
18.3 |
19.4 |
15.2 |
18.3 |
Note: There are many approaches to valuing a company. The analysts would likely review a company using several approaches.
Required
a. Liquidity
1. Review the summary analysis for Nike, Inc., from 2007–2009. Give your opinion of the liquidity position (refer back to Exhibit 3, Summary Analysis).
2. Review the current ratio in this case (2005–2009). Give your opinion of the liquidity position.
3. Review cash provided by operations (2005–2009). Give your opinion as to the trend.
b. Long term debt paying ability
1. Review the summary analysis for Nike, Inc., from 2007–2009. Give your opinion of the debt position (refer back to Exhibit 3, Summary Analysis).
2. Review the trend of long term debt in relation to total assets (2007–2009). Give your opinion of the debt trend.
c. Profitability
1. Review the summary analysis for Nike, Inc. from 2007–2009. Give your opinion of the profitability (refer back to Exhibit 3, Summary Analysis).
2. Review the trend in revenues (2005–2009). Comment on the trend.
3. Review the trend in gross margin (2005–2009). Comment on the trend.
d. Investor Analysis
1. Review the absolute amount and trend in the price/earnings. Considering liquidity, debt, and profitability, is there a reasonable probability that the price/earnings may increase?
2. Comment on the trend in market capitalization (2005–2009) (share price _ number of outstanding shares).
3. Review cash dividends declared per common share (2005–2009). Is there a likely chance that dividends will be increased during the year ended May 31, 2010?
4. Give your opinion of the stock price of Nike, Inc., on May 31, 2011. In practice, many things would be considered that are not presented in this case. Base your opinion on the summary analysis (2007–2009) and the data provided with this case.
e. Other
1. This case has used a fundamental financial statement approach to valuing Nike. In your opinion, would an analyst likely use this type of approach for valuing Nike? Comment.