Today we're going to take a look at the well-established NIKE, Inc. (NYSE:NKE). The company's stock saw a decent share price growth in the teens level on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at NIKE’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in NIKE?
NIKE appears to be overvalued by 21.93% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$88.69 on the market compared to my intrinsic value of $72.74. This means that the opportunity to buy NIKE at a good price has disappeared! In addition to this, it seems like NIKE’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will NIKE generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 50% over the next couple of years, the future seems bright for NIKE. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? NKE’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe NKE should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on NKE for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for NKE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on NIKE. You can find everything you need to know about NIKE in the latest infographic research report. If you are no longer interested in NIKE, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.