Integer Investments: Nike Is Now A BUY, Target Price: $66

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By Integer Investments

Why we like Nike

  • Business model: If you think Nike is a sports company, well you are (partially) wrong. Nike is a design and marketing company. Nike does not produce its products, and its key competitive advantage is its ability to be a slim, cool and innovative company that partners with world famous athletes. Nike has maintained its leadership position due to its continued focus on design, research and development.

     

  • Innovation: Nike filed for 541 patents in 2014 and 687 patents in 2016. Nearly 80% relate to four key areas: footwear, apparel, data and manufacturing (source: BizJournals).

     

  • Brand: Undoubtedly, Nike is one of the most recognizable brands in the world.

    Profitability

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    Nike’s business model ensures strong and consistent profitability. For its size, Nike is also very agile and its performance metrics are great: return on equity of 30.2%, return on assets of 12.4% and return on capital of 26%.

    Conclusion

    Nike is not cheap and is not on sale, but it is a great company at fair value. The company has an outstanding track record, top-notch management that rewards shareholders, a strong brand, balance sheet and profitability. Now it is discounting some temporary weakness in the U.S. and competition from the likes of Under Armour is gaining market share, but Nike is a great and innovative company that will thrive in the long term. We started a position today.

    A full version of this article can be found here.

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