Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $NKE ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 25.36x
โข10-Year Mean: 29.58x
โขNTM FCF Yield: 4.55%
โข10-Year Mean: 3.21%
As you can see, $NKE appears to be trading below fair value
Going forward, investors can receive ~16% MORE in earnings per share & substantially MORE in FCF* per share ๐ง ***
Before we get into valuation, letโs take a look at why $NKE is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $10.57B
โขLong-Term Debt: $8.93B
$NKE has a strong balance sheet, an AA- S&P Credit Rating & 26x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 35.7%
โข2020: 14.2%
โข2021: 27.3%
โข2022: 22.1%
โข2023: 20.9%
โขLTM: 21.0%
RETURN ON EQUITYโ
โข2019: 42.7%
โข2020: 29.7%
โข2021: 55.0%
โข2022: 43.1%
โข2023: 34.6%
โขLTM: 36.4%
$NKE has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $27.80B
โข2024E: $51.65B
โขCAGR: 6.39
FREE CASH FLOWโ *
โข2014: $2.12B
โข2024E: $5.64B
โขCAGR: 10.27%
*FCF isnโt the most reliable figure in assessing $NKE valuation, despite how high the FCF Yield may be today
NORMALIZED EPSโ
โข2014: $1.49
โข2024E: $3.72
โขCAGR: 9.58%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 1.81B
โขLTM Shares Outstanding: 1.54B
By reducing its shares outstanding ~14.9%, $NKE increased its EPS by ~17.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 44.3%
โขLTM Operating Margins: 11.6%
โขLTM Net Income Margins: 10.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~16% MORE in EPS & substantially more in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $NKE has to grow earnings at a 12.68% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.68%) required growth rate:
2024E: $3.72 (15.0% YoY) *FY May $NKE reports earnings today After Market Close
2025E: $3.86 (3.9% YoY)
2026E: $4.31 (11.5% YoY)
$NKE has a good track record of meeting analyst estimates ~2 years out, so letโs assume $NKE ends 2026 with $4.31 in EPS & see its CAGR potential assuming different multiples:
26x P/E: $112.06๐ต โฆ ~10.7% CAGR
25x P/E: $107.75๐ต โฆ ~8.6% CAGR
24x P/E: $103.44๐ต โฆ ~6.5% CAGR
23x P/E: $99.13๐ต โฆ ~4.4% CAGR
As you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why Iโm not willing to rely on this assumption)
With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested
Yet, even assuming 25x, weโre not left with much of a margin of safety
Iโd consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85๐ต (~9% below todays price)
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
tweet
A sober valuation analysis on $NKE ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 25.36x
โข10-Year Mean: 29.58x
โขNTM FCF Yield: 4.55%
โข10-Year Mean: 3.21%
As you can see, $NKE appears to be trading below fair value
Going forward, investors can receive ~16% MORE in earnings per share & substantially MORE in FCF* per share ๐ง ***
Before we get into valuation, letโs take a look at why $NKE is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $10.57B
โขLong-Term Debt: $8.93B
$NKE has a strong balance sheet, an AA- S&P Credit Rating & 26x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 35.7%
โข2020: 14.2%
โข2021: 27.3%
โข2022: 22.1%
โข2023: 20.9%
โขLTM: 21.0%
RETURN ON EQUITYโ
โข2019: 42.7%
โข2020: 29.7%
โข2021: 55.0%
โข2022: 43.1%
โข2023: 34.6%
โขLTM: 36.4%
$NKE has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $27.80B
โข2024E: $51.65B
โขCAGR: 6.39
FREE CASH FLOWโ *
โข2014: $2.12B
โข2024E: $5.64B
โขCAGR: 10.27%
*FCF isnโt the most reliable figure in assessing $NKE valuation, despite how high the FCF Yield may be today
NORMALIZED EPSโ
โข2014: $1.49
โข2024E: $3.72
โขCAGR: 9.58%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 1.81B
โขLTM Shares Outstanding: 1.54B
By reducing its shares outstanding ~14.9%, $NKE increased its EPS by ~17.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 44.3%
โขLTM Operating Margins: 11.6%
โขLTM Net Income Margins: 10.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~16% MORE in EPS & substantially more in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $NKE has to grow earnings at a 12.68% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.68%) required growth rate:
2024E: $3.72 (15.0% YoY) *FY May $NKE reports earnings today After Market Close
2025E: $3.86 (3.9% YoY)
2026E: $4.31 (11.5% YoY)
$NKE has a good track record of meeting analyst estimates ~2 years out, so letโs assume $NKE ends 2026 with $4.31 in EPS & see its CAGR potential assuming different multiples:
26x P/E: $112.06๐ต โฆ ~10.7% CAGR
25x P/E: $107.75๐ต โฆ ~8.6% CAGR
24x P/E: $103.44๐ต โฆ ~6.5% CAGR
23x P/E: $99.13๐ต โฆ ~4.4% CAGR
As you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why Iโm not willing to rely on this assumption)
With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested
Yet, even assuming 25x, weโre not left with much of a margin of safety
Iโd consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85๐ต (~9% below todays price)
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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Offshore
Photo
โ Dimitry Nakhla | Babylon Capitalยฎ
Earlier today I shared my โsober valuation analysis ๐ง๐ฝโโ๏ธโ on $NKE suggesting I wouldnโt pay more than $85๐ต a share for the business
$NKE is now down ~11% after hours, trading for ~$83๐ต
As I stated in my analysis:
โAs you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why Iโm not willing to rely on this assumption)
With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested
Yet, even assuming 25x, weโre not left with much of a margin of safety
Iโd consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85๐ต (~9% below todays price)โ
#stocks #investing
_______
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ."
A sober valuation analysis on $NKE ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 25.36x
โข10-Year Mean: 29.58x
โขNTM FCF Yield: 4.55%
โข10-Year Mean: 3.21%
As you can see, $NKE appears to be trading below fair value
Going forward, investors can receive ~16% MORE in earnings per share & substantially MORE in FCF* per share ๐ง ***
Before we get into valuation, letโs take a look at why $NKE is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $10.57B
โขLong-Term Debt: $8.93B
$NKE has a strong balance sheet, an AA- S&P Credit Rating & 26x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 35.7%
โข2020: 14.2%
โข2021: 27.3%
โข2022: 22.1%
โข2023: 20.9%
โขLTM: 21.0%
RETURN ON EQUITYโ
โข2019: 42.7%
โข2020: 29.7%
โข2021: 55.0%
โข2022: 43.1%
โข2023: 34.6%
โขLTM: 36.4%
$NKE has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $27.80B
โข2024E: $51.65B
โขCAGR: 6.39
FREE CASH FLOWโ *
โข2014: $2.12B
โข2024E: $5.64B
โขCAGR: 10.27%
*FCF isnโt the most reliable figure in assessing $NKE valuation, despite how high the FCF Yield may be today
NORMALIZED EPSโ
โข2014: $1.49
โข2024E: $3.72
โขCAGR: 9.58%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 1.81B
โขLTM Shares Outstanding: 1.54B
By reducing its shares outstanding ~14.9%, $NKE increased its EPS by ~17.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 44.3%
โขLTM Operating Margins: 11.6%
โขLTM Net Income Margins: 10.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~16% MORE in EPS & substantially more in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $NKE has to grow earnings at a 12.68% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.68%) required growth rate:
2024E: $3.72 (15.0% YoY) *FY May $NKE reports earnings toda[...]
Earlier today I shared my โsober valuation analysis ๐ง๐ฝโโ๏ธโ on $NKE suggesting I wouldnโt pay more than $85๐ต a share for the business
$NKE is now down ~11% after hours, trading for ~$83๐ต
As I stated in my analysis:
โAs you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why Iโm not willing to rely on this assumption)
With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested
Yet, even assuming 25x, weโre not left with much of a margin of safety
Iโd consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85๐ต (~9% below todays price)โ
#stocks #investing
_______
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ."
A sober valuation analysis on $NKE ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 25.36x
โข10-Year Mean: 29.58x
โขNTM FCF Yield: 4.55%
โข10-Year Mean: 3.21%
As you can see, $NKE appears to be trading below fair value
Going forward, investors can receive ~16% MORE in earnings per share & substantially MORE in FCF* per share ๐ง ***
Before we get into valuation, letโs take a look at why $NKE is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $10.57B
โขLong-Term Debt: $8.93B
$NKE has a strong balance sheet, an AA- S&P Credit Rating & 26x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 35.7%
โข2020: 14.2%
โข2021: 27.3%
โข2022: 22.1%
โข2023: 20.9%
โขLTM: 21.0%
RETURN ON EQUITYโ
โข2019: 42.7%
โข2020: 29.7%
โข2021: 55.0%
โข2022: 43.1%
โข2023: 34.6%
โขLTM: 36.4%
$NKE has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $27.80B
โข2024E: $51.65B
โขCAGR: 6.39
FREE CASH FLOWโ *
โข2014: $2.12B
โข2024E: $5.64B
โขCAGR: 10.27%
*FCF isnโt the most reliable figure in assessing $NKE valuation, despite how high the FCF Yield may be today
NORMALIZED EPSโ
โข2014: $1.49
โข2024E: $3.72
โขCAGR: 9.58%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 1.81B
โขLTM Shares Outstanding: 1.54B
By reducing its shares outstanding ~14.9%, $NKE increased its EPS by ~17.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 44.3%
โขLTM Operating Margins: 11.6%
โขLTM Net Income Margins: 10.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~16% MORE in EPS & substantially more in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $NKE has to grow earnings at a 12.68% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.68%) required growth rate:
2024E: $3.72 (15.0% YoY) *FY May $NKE reports earnings toda[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ Earlier today I shared my โsober valuation analysis ๐ง๐ฝโโ๏ธโ on $NKE suggesting I wouldnโt pay more than $85๐ต a share for the business $NKE is now down ~11% after hours, trading for ~$83๐ต As I stated in my analysis: โAsโฆ
y After Market Close
2025E: $3.86 (3.9% YoY)
2026E: $4.31 (11.5% YoY)
$NKE has a good track record of meeting analyst estimates ~2 years out, so letโs assume $NKE ends 2026 with $4.31 in EPS & see its CAGR potential assuming different multiples:
26x P/E: $112.06๐ต โฆ ~10.7% CAGR
25x P/E: $107.75๐ต โฆ ~8.6% CAGR
24x P/E: $103.44๐ต โฆ ~6.5% CAGR
23x P/E: $99.13๐ต โฆ ~4.4% CAGR
As you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why Iโm not willing to rely on this assumption)
With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested
Yet, even assuming 25x, weโre not left with much of a margin of safety
Iโd consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85๐ต (~9% below todays price)
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. "- Dimitry Nakhla | Babylon Capitalยฎ
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2025E: $3.86 (3.9% YoY)
2026E: $4.31 (11.5% YoY)
$NKE has a good track record of meeting analyst estimates ~2 years out, so letโs assume $NKE ends 2026 with $4.31 in EPS & see its CAGR potential assuming different multiples:
26x P/E: $112.06๐ต โฆ ~10.7% CAGR
25x P/E: $107.75๐ต โฆ ~8.6% CAGR
24x P/E: $103.44๐ต โฆ ~6.5% CAGR
23x P/E: $99.13๐ต โฆ ~4.4% CAGR
As you can see, $NKE appears to have attractive return potential if we assume a >26x multiple which is well below its 10-year average of 29.54x (albeit a bit elevated due to valuation spike between 2020-2022 & partly why Iโm not willing to rely on this assumption)
With 25x earnings being a solid level of fundamental support, $NKE appears to have decent growth potential but not enough to get me interested
Yet, even assuming 25x, weโre not left with much of a margin of safety
Iโd consider $NKE a strong purchase with a substantial margin of safety closer to 23x NTM earnings or closer to $85๐ต (~9% below todays price)
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. "- Dimitry Nakhla | Babylon Capitalยฎ
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AkhenOsiris
Zip, an AI-powered procurement platform, announced today that it has helped customers achieve $4.4 billion in savings since its launch in 2020. The company, which serves enterprises across industries including technology, financial services, and healthcare, is leveraging artificial intelligence to streamline procurement processes and drive cost efficiencies.
Rujul Zaparde, Zipโs founder and CEO, explained in an exclusive interview with VentureBeat how these savings are realized, saying, โWe make it really easy for somebody to actually follow the right path, which means that a team like procurement or a strategic sourcing team can actually get looped in earlier.โ This early involvement allows for more strategic purchasing decisions and better negotiation opportunities.
Zipโs AI capabilities have expanded significantly in recent years. Zaparde highlighted new functionalities, such as advanced contract review, telling VentureBeat, โWe can actually flag more complicated notions of risksโฆThatโs not something that was possible a year ago or a year and change ago.โ
The platform integrates with OpenAIโs technology to power its AI features. However, Zaparde emphasizes that Zipโs value lies in its enterprise-grade capabilities and focus on user experience. โWeโve sort of set the standard and created a category for intake and orchestration in the enterprise,โ he said.
As concerns about AI accuracy persist, especially in reviewing complex legal documents, Zaparde acknowledges the importance of human oversight. โFor you, as a customer, to be really confident, you should, of course, have a human review it. But we do also recommend the output.โ However, he notes that the AI is โmuch more consistent than a humanโand it is way faster.โ
Zipโs customer base includes notable names like OpenAI, Anthropic, Sephora, Reddit, Snowflake and Lyft. The company also serves highly regulated industries, including public healthcare systems and banks, underscoring its commitment to data security and privacy.
tweet
Zip, an AI-powered procurement platform, announced today that it has helped customers achieve $4.4 billion in savings since its launch in 2020. The company, which serves enterprises across industries including technology, financial services, and healthcare, is leveraging artificial intelligence to streamline procurement processes and drive cost efficiencies.
Rujul Zaparde, Zipโs founder and CEO, explained in an exclusive interview with VentureBeat how these savings are realized, saying, โWe make it really easy for somebody to actually follow the right path, which means that a team like procurement or a strategic sourcing team can actually get looped in earlier.โ This early involvement allows for more strategic purchasing decisions and better negotiation opportunities.
Zipโs AI capabilities have expanded significantly in recent years. Zaparde highlighted new functionalities, such as advanced contract review, telling VentureBeat, โWe can actually flag more complicated notions of risksโฆThatโs not something that was possible a year ago or a year and change ago.โ
The platform integrates with OpenAIโs technology to power its AI features. However, Zaparde emphasizes that Zipโs value lies in its enterprise-grade capabilities and focus on user experience. โWeโve sort of set the standard and created a category for intake and orchestration in the enterprise,โ he said.
As concerns about AI accuracy persist, especially in reviewing complex legal documents, Zaparde acknowledges the importance of human oversight. โFor you, as a customer, to be really confident, you should, of course, have a human review it. But we do also recommend the output.โ However, he notes that the AI is โmuch more consistent than a humanโand it is way faster.โ
Zipโs customer base includes notable names like OpenAI, Anthropic, Sephora, Reddit, Snowflake and Lyft. The company also serves highly regulated industries, including public healthcare systems and banks, underscoring its commitment to data security and privacy.
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Offshore
Photo
โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: $CVS down ~22% since this post ๐
This highlights the importance of considering factors beyond value when investing โผ๏ธ
Thorough analysis of quality and capital allocation decisions is crucial to lessen the odds of falling into โvalue trapsโ
While $CVS made a strategic decision in acquiring Aetna, subsequent acquisitions of Oak Street Health and Signify Health were corrosive to shareholder value
Optimal resource allocation and operational efficiency maximization following the Aetna acquisition would have been the more effective approach for $CVS
#stocks #investing
tweet
RT @DimitryNakhla: $CVS down ~22% since this post ๐
This highlights the importance of considering factors beyond value when investing โผ๏ธ
Thorough analysis of quality and capital allocation decisions is crucial to lessen the odds of falling into โvalue trapsโ
While $CVS made a strategic decision in acquiring Aetna, subsequent acquisitions of Oak Street Health and Signify Health were corrosive to shareholder value
Optimal resource allocation and operational efficiency maximization following the Aetna acquisition would have been the more effective approach for $CVS
#stocks #investing
@scroogecapital May be undervalued, yet I donโt consider $CVS investable due to its poor capital allocation & balance sheet โฆ from the moment I canโt consider it a high-quality business, I stay away
No need for me to consider $CVS when I have many others to choose from ๐ช๐ฝ tweet