Nike is a strong brand showing consistent revenue growth and excellent financial health.
Nike’s revenue and earnings outlook for the next 5 years shows a continued ability to generate superior growth and dominate the industry.
An estimated intrinsic value for shares of Nike based on best- and worst-case scenarios for the company, industry, and economy.
In analyzing stock valuations, people often use the price-to-earnings ratio as a shortcut. The problem is, it is just that a shortcut. It is the stock price divided by the trailing 12 months’ earnings per share. It is a simple measurement of past performance in a complex system that cannot be reduced to one number. P/E is a screening tool at best. It does not tell us enough about the most important factors of stock ownership: future earnings and cash flows.
Nike (NKE) has a P/E ratio of around 65, so investors are currently paying 65 times the last 12 months’ earnings per share to buy the stock. If the last 12 months’ earnings per share were to continue indefinitely, it would take 65 years to make your money back. So, initially, Nike looks extremely expensive. Thankfully, the appropriate price of a stock is based on a lot more than current EPS. Let’s conduct a more detailed assessment of Nike’s current earnings and project its future earnings to get a more accurate assessment of Nike’s intrinsic value. Continue reading…
You know that you need to budget, save, and pay off debt. Your parents, your teachers, your friend who is a financial advisor, and the morning news show you watch have all told you so. You made a list of bills and expenses and subtracted them from your income, figured out how much you had left, and maybe put some of that into your savings account every month. You’ve been doing that for awhile and don’t seem to be getting anywhere. The savings always gets spent, or somehow the money never makes it into savings in the first place. Something always comes up. The student loan debt seems like it is never going to go away, and saving up to buy a house is never going to happen. It’s time to look at a new approach to budgeting. Continue reading “The Net Worth Budget”→
I have been wanting to put this lesson together for awhile. I created an annuity spreadsheet to calculate the long-term impact of various spending habits. What would your retirement income look like if you brewed your coffee at home instead of going to Starbucks or drove a sedan instead of an SUV? When you replace small spending habits over a 30 year period and earn investment returns on the savings, the difference can be tens and even hundreds of thousands of dollars. Check it out:
Good to Great, which is sort of a prequel to Collins’s bestselling Built to Last, is a study of 11 established companies that suddenly broke out and outperformed the market in an unbelievable fashion. 11 comparison companies that remained stable in the same industry and environment are used in the study. Continue reading “Book Review: Good to Great”→
In Save, Spend, Invest, Give, Daniel Pecaut shares his expertise on personal finance as the CEO of an investment firm for over 30 years. Pecaut is a value investor inspired by value gurus like Warren Buffett and John Templeton. However, this is not so much a value investing guide as it is an inspirational personal finance guide. Continue reading “Book Review: Save, Spend, Invest, Give”→