FUNDAMENTAL revenue comes from North America followed by Western

FUNDAMENTAL ANALYSIS Revenue AnalysisNikeoperates globally. Its highest revenue comes from North America followed byWestern Europe. But since 2015, emerging Asian markets have become 2ndlargest revenue generating region behind north America.

Figure10. Nike’s region wise revenue  Figure11. Revenue PerformanceNike has shown impressive growth of 8%CAGR from year 2013 to 2017 which is significantly better than its competitors.Figure12.

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Comparison between Nike, Adidas and PumaOver last ten years, neither of Adidas orPuma has been able to beat Nike in terms of sales. Puma’s revenue just accountsfor 11.54% of Nike’s revenue whereas Adidas’s revenue is 66% of Nike’s revenuein year 2016.  Figure13.

Financial Performance of NikeThe financial data about Nike exhibitsthat the company is performing very well. The Revenues, Net Income, EarningsPer Share (EPS) and Dividend Per Share (DPS) shows an increasing trend and haveincreased every year from 2013. The Return on Equity (ROE) represents thatreturn the company is earning on its equity has been increasing every yearwhich means the profit available/returns to shareholders with respect tocapital provided by them is increasing every year.Nike shows a healthy balance sheet withhigh profitability ratios of Return on Equity, Return on Asset which are significantlygreater than the sector and the country median.

Distance to default score of0.8 shows the strong position of company and how well the risk management isdone in-order to reduce the probability of default.Figure14. Financial Ratios of NikeThe net margin percent has been increasingshowing company’s efficiency in reducing the cost over the years.Profitability AnalysisFigure15. EPS for NikeEPS shows a CAGR of 16% from 2013 to 2017.

Figure16. Return on invested Capital for NikeThere has been 5% growth in Return onCapital Invested from 2016 to 2017 which is more growth than between pastcouple of years. Figure16. Nike vs S&P 500Nike even achieved to out-perform S&P500 return which was 105% compared to 107% of Nike. Figure17.

Comparison of Returns It has managed to beat major benchmarks ofS&P 500 Index and Dow Jones Industrial Average constantly over past 5years.Figure18. Nike ForecastNikehas managed to beat few of the forecast for the year 2017 which shows the goodand steady heath of the company. Actual EPS and actual sales for the 4thquarter was surpassed by 19.37% compared to analyst forecast.RISK ANALYSISThere are 3 main obstacle that Nike faces thatcan threaten its global leader position1)    Sportsweargoing out of fashion is a threat that Nike may face given consumers are fickly.Youth is nowadays preferring athleisure like leggings ratherthan particular sportswear.

This can be a threat for Nike’s sportswear  lineup.2)    Under Armour growing presence forsportswear  in USA can be a great threatto Nike.3)    Unpredictablenature of consumers in Chinese markets can be a threat for Nike. Since therising of middle class income group, the demand for sportswear has increasedsignificanty but consumers sometimes prefer fast fashion brand like Zara,H, etc over Nike which serve fashion sportswear option too.

Risk Analysis fromCompany’s Point of ViewGlobalEconomic Conditions: Following factors affect Nike’sbusiness significantly o   Lower Consumerspending due to weak financial health of the customer.o   Higher borrowingrates in credit and capital marketo   High volatilityobserved in prices of raw material and commodity used for manufacturing ofproduct having adverse effects on costs and gross margino   Reduced orders fromretailors due to their declining revenues, switching brands they prefer tosell, bad debt experience etc.o   Insolvency of fewretailors leading to negative impact on saleso   Financing problemsfor supply chain contractors which inturn affect Nike’s business leading tonon-delivery and reduced customer satisfaction ·      Cyclicnature of the Nike’s business: Sales are highly depended on seasons. For eg.

During European Football championship and Olympics  sales are usually high for football shoescompared to other period of the year.·      Inaccurateestimation of future sales: Under-estimation of sales unit can lead to loss ofsales opportunity while over-estimation can lead to high inventory holdingcost.·      Credit andLiquidity risk: concentration of retail market share among few retailorsleading to high credit risk and liquidity shortage thereby increasing defaultrisk.

·      Protectionof Intellectual Property Rights: Since footwear and sportswear is highcompetitive business, a company can have an edge over others by innovation andR which can be patented. Failure to protect them can lead to competitorcopying it thus suffering loss.·      CountrySpecific risk: Risk due to various political issues, tax rates, new tax laws andchanges in trade laws directly affect the sales and revenue for NIKE. Eg.Brexit.·      Counterpartydefault risk will highly affect NIKE.