Intrinsic value of Nike Cl B - NKE

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$53.28

  Intrinsic Value

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  Value-price divergence*

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$53.28

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of NKE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 87.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.80
  6.40
  6.26
  6.13
  6.02
  5.92
  5.83
  5.74
  5.67
  5.60
  5.54
  5.49
  5.44
  5.40
  5.36
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
  5.07
  5.07
Revenue, $m
  32,376
  34,448
  36,605
  38,850
  41,189
  43,627
  46,169
  48,821
  51,588
  54,479
  57,498
  60,654
  63,953
  67,403
  71,014
  74,792
  78,747
  82,888
  87,226
  91,771
  96,533
  101,524
  106,756
  112,241
  117,992
  124,023
  130,349
  136,985
  143,945
  151,248
  158,910
Variable operating expenses, $m
 
  28,109
  29,868
  31,699
  33,607
  35,595
  37,668
  39,831
  42,088
  44,446
  46,908
  49,469
  52,160
  54,974
  57,918
  61,000
  64,226
  67,603
  71,141
  74,848
  78,732
  82,803
  87,070
  91,543
  96,234
  101,153
  106,312
  111,724
  117,401
  123,357
  129,606
Fixed operating expenses, $m
 
  1,536
  1,575
  1,614
  1,655
  1,696
  1,738
  1,782
  1,826
  1,872
  1,919
  1,967
  2,016
  2,066
  2,118
  2,171
  2,225
  2,281
  2,338
  2,396
  2,456
  2,518
  2,581
  2,645
  2,711
  2,779
  2,849
  2,920
  2,993
  3,068
  3,144
Total operating expenses, $m
  27,874
  29,645
  31,443
  33,313
  35,262
  37,291
  39,406
  41,613
  43,914
  46,318
  48,827
  51,436
  54,176
  57,040
  60,036
  63,171
  66,451
  69,884
  73,479
  77,244
  81,188
  85,321
  89,651
  94,188
  98,945
  103,932
  109,161
  114,644
  120,394
  126,425
  132,750
Operating income, $m
  4,502
  4,803
  5,162
  5,537
  5,928
  6,336
  6,762
  7,208
  7,674
  8,161
  8,671
  9,218
  9,777
  10,363
  10,977
  11,621
  12,296
  13,004
  13,747
  14,527
  15,345
  16,204
  17,106
  18,053
  19,047
  20,091
  21,188
  22,341
  23,551
  24,823
  26,160
EBITDA, $m
  5,164
  5,195
  5,578
  5,977
  6,394
  6,829
  7,283
  7,758
  8,254
  8,773
  9,317
  9,885
  10,481
  11,105
  11,758
  12,444
  13,162
  13,916
  14,707
  15,536
  16,407
  17,321
  18,280
  19,287
  20,345
  21,456
  22,622
  23,848
  25,135
  26,487
  27,908
Interest expense (income), $m
  70
  84
  108
  134
  160
  188
  217
  246
  278
  310
  344
  380
  417
  456
  497
  539
  584
  630
  679
  730
  784
  840
  899
  960
  1,025
  1,093
  1,164
  1,238
  1,317
  1,399
  1,485
Earnings before tax, $m
  4,623
  4,719
  5,054
  5,403
  5,767
  6,148
  6,546
  6,961
  7,396
  7,851
  8,327
  8,838
  9,360
  9,907
  10,480
  11,082
  11,712
  12,374
  13,068
  13,796
  14,561
  15,364
  16,207
  17,092
  18,022
  18,999
  20,025
  21,103
  22,235
  23,425
  24,675
Tax expense, $m
  863
  1,274
  1,364
  1,459
  1,557
  1,660
  1,767
  1,880
  1,997
  2,120
  2,248
  2,386
  2,527
  2,675
  2,830
  2,992
  3,162
  3,341
  3,528
  3,725
  3,931
  4,148
  4,376
  4,615
  4,866
  5,130
  5,407
  5,698
  6,003
  6,325
  6,662
Net income, $m
  3,760
  3,445
  3,689
  3,944
  4,210
  4,488
  4,778
  5,082
  5,399
  5,731
  6,078
  6,452
  6,833
  7,232
  7,651
  8,090
  8,550
  9,033
  9,540
  10,071
  10,630
  11,216
  11,831
  12,477
  13,156
  13,869
  14,618
  15,405
  16,232
  17,100
  18,013

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,499
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  21,379
  16,895
  17,952
  19,053
  20,201
  21,396
  22,643
  23,943
  25,301
  26,718
  28,199
  29,747
  31,365
  33,057
  34,828
  36,681
  38,620
  40,652
  42,779
  45,008
  47,343
  49,791
  52,357
  55,047
  57,868
  60,826
  63,928
  67,182
  70,596
  74,178
  77,935
Adjusted assets (=assets-cash), $m
  15,880
  16,895
  17,952
  19,053
  20,201
  21,396
  22,643
  23,943
  25,301
  26,718
  28,199
  29,747
  31,365
  33,057
  34,828
  36,681
  38,620
  40,652
  42,779
  45,008
  47,343
  49,791
  52,357
  55,047
  57,868
  60,826
  63,928
  67,182
  70,596
  74,178
  77,935
Revenue / Adjusted assets
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
  2.039
Average production assets, $m
  1,787
  1,895
  2,013
  2,137
  2,265
  2,399
  2,539
  2,685
  2,837
  2,996
  3,162
  3,336
  3,517
  3,707
  3,906
  4,114
  4,331
  4,559
  4,797
  5,047
  5,309
  5,584
  5,872
  6,173
  6,490
  6,821
  7,169
  7,534
  7,917
  8,319
  8,740
Working capital, $m
  9,667
  4,478
  4,759
  5,050
  5,355
  5,671
  6,002
  6,347
  6,706
  7,082
  7,475
  7,885
  8,314
  8,762
  9,232
  9,723
  10,237
  10,775
  11,339
  11,930
  12,549
  13,198
  13,878
  14,591
  15,339
  16,123
  16,945
  17,808
  18,713
  19,662
  20,658
Total debt, $m
  2,038
  2,581
  3,186
  3,816
  4,472
  5,156
  5,869
  6,613
  7,389
  8,200
  9,047
  9,932
  10,858
  11,826
  12,838
  13,898
  15,008
  16,170
  17,387
  18,661
  19,997
  21,398
  22,865
  24,404
  26,017
  27,709
  29,484
  31,345
  33,298
  35,347
  37,496
Total liabilities, $m
  9,121
  9,664
  10,269
  10,899
  11,555
  12,239
  12,952
  13,696
  14,472
  15,283
  16,130
  17,015
  17,941
  18,909
  19,921
  20,981
  22,091
  23,253
  24,470
  25,744
  27,080
  28,481
  29,948
  31,487
  33,100
  34,792
  36,567
  38,428
  40,381
  42,430
  44,579
Total equity, $m
  12,258
  7,231
  7,684
  8,155
  8,646
  9,158
  9,691
  10,248
  10,829
  11,435
  12,069
  12,732
  13,424
  14,148
  14,906
  15,699
  16,529
  17,399
  18,309
  19,263
  20,263
  21,311
  22,409
  23,560
  24,767
  26,033
  27,361
  28,754
  30,215
  31,748
  33,356
Total liabilities and equity, $m
  21,379
  16,895
  17,953
  19,054
  20,201
  21,397
  22,643
  23,944
  25,301
  26,718
  28,199
  29,747
  31,365
  33,057
  34,827
  36,680
  38,620
  40,652
  42,779
  45,007
  47,343
  49,792
  52,357
  55,047
  57,867
  60,825
  63,928
  67,182
  70,596
  74,178
  77,935
Debt-to-equity ratio
  0.166
  0.360
  0.410
  0.470
  0.520
  0.560
  0.610
  0.650
  0.680
  0.720
  0.750
  0.780
  0.810
  0.840
  0.860
  0.890
  0.910
  0.930
  0.950
  0.970
  0.990
  1.000
  1.020
  1.040
  1.050
  1.060
  1.080
  1.090
  1.100
  1.110
  1.120
Adjusted equity ratio
  0.426
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428
  0.428

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,760
  3,445
  3,689
  3,944
  4,210
  4,488
  4,778
  5,082
  5,399
  5,731
  6,078
  6,452
  6,833
  7,232
  7,651
  8,090
  8,550
  9,033
  9,540
  10,071
  10,630
  11,216
  11,831
  12,477
  13,156
  13,869
  14,618
  15,405
  16,232
  17,100
  18,013
Depreciation, amort., depletion, $m
  662
  392
  416
  440
  466
  493
  521
  550
  581
  612
  646
  667
  703
  741
  781
  823
  866
  912
  959
  1,009
  1,062
  1,117
  1,174
  1,235
  1,298
  1,364
  1,434
  1,507
  1,583
  1,664
  1,748
Funds from operations, $m
  1,516
  3,837
  4,105
  4,385
  4,676
  4,981
  5,299
  5,632
  5,980
  6,343
  6,724
  7,119
  7,536
  7,974
  8,432
  8,912
  9,416
  9,945
  10,499
  11,081
  11,691
  12,332
  13,005
  13,712
  14,454
  15,233
  16,052
  16,912
  17,815
  18,764
  19,761
Change in working capital, $m
  -1,580
  269
  280
  292
  304
  317
  330
  345
  360
  376
  393
  410
  429
  449
  469
  491
  514
  538
  564
  591
  619
  649
  680
  713
  748
  784
  822
  863
  905
  949
  996
Cash from operations, $m
  3,096
  2,062
  3,825
  4,093
  4,372
  4,664
  4,969
  5,287
  5,620
  5,968
  6,331
  6,709
  7,107
  7,525
  7,963
  8,421
  8,902
  9,406
  9,935
  10,490
  11,072
  11,684
  12,325
  12,999
  13,706
  14,449
  15,229
  16,049
  16,910
  17,814
  18,765
Maintenance CAPEX, $m
  0
  -357
  -379
  -403
  -427
  -453
  -480
  -508
  -537
  -567
  -599
  -632
  -667
  -703
  -741
  -781
  -823
  -866
  -912
  -959
  -1,009
  -1,062
  -1,117
  -1,174
  -1,235
  -1,298
  -1,364
  -1,434
  -1,507
  -1,583
  -1,664
New CAPEX, $m
  -1,143
  -108
  -119
  -123
  -129
  -134
  -140
  -146
  -152
  -159
  -166
  -174
  -181
  -190
  -199
  -208
  -218
  -228
  -239
  -250
  -262
  -275
  -288
  -302
  -316
  -332
  -348
  -365
  -383
  -402
  -421
Cash from investing activities, $m
  -1,034
  -465
  -498
  -526
  -556
  -587
  -620
  -654
  -689
  -726
  -765
  -806
  -848
  -893
  -940
  -989
  -1,041
  -1,094
  -1,151
  -1,209
  -1,271
  -1,337
  -1,405
  -1,476
  -1,551
  -1,630
  -1,712
  -1,799
  -1,890
  -1,985
  -2,085
Free cash flow, $m
  2,062
  1,597
  3,327
  3,567
  3,816
  4,077
  4,349
  4,633
  4,931
  5,241
  5,566
  5,903
  6,259
  6,632
  7,023
  7,432
  7,862
  8,312
  8,785
  9,281
  9,801
  10,347
  10,921
  11,523
  12,155
  12,820
  13,517
  14,250
  15,020
  15,829
  16,680
Issuance/(repayment) of debt, $m
  801
  588
  605
  630
  656
  684
  713
  744
  776
  811
  847
  885
  926
  968
  1,013
  1,060
  1,110
  1,162
  1,217
  1,275
  1,336
  1,400
  1,468
  1,539
  1,613
  1,692
  1,775
  1,861
  1,953
  2,049
  2,149
Issuance/(repurchase) of shares, $m
  -2,731
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1,649
  588
  605
  630
  656
  684
  713
  744
  776
  811
  847
  885
  926
  968
  1,013
  1,060
  1,110
  1,162
  1,217
  1,275
  1,336
  1,400
  1,468
  1,539
  1,613
  1,692
  1,775
  1,861
  1,953
  2,049
  2,149
Total cash flow (excl. dividends), $m
  308
  2,184
  3,932
  4,196
  4,473
  4,761
  5,062
  5,377
  5,707
  6,052
  6,413
  6,788
  7,184
  7,600
  8,035
  8,492
  8,971
  9,474
  10,002
  10,555
  11,137
  11,747
  12,388
  13,062
  13,769
  14,512
  15,292
  16,112
  16,973
  17,878
  18,829
Retained Cash Flow (-), $m
  449
  -427
  -453
  -471
  -491
  -512
  -534
  -557
  -581
  -607
  -634
  -662
  -693
  -724
  -758
  -793
  -830
  -869
  -911
  -954
  -1,000
  -1,048
  -1,098
  -1,151
  -1,207
  -1,266
  -1,328
  -1,393
  -1,461
  -1,533
  -1,608
Prev. year cash balance distribution, $m
 
  5,454
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  7,211
  3,479
  3,725
  3,982
  4,249
  4,529
  4,821
  5,126
  5,445
  5,779
  6,126
  6,492
  6,875
  7,278
  7,699
  8,141
  8,605
  9,091
  9,602
  10,137
  10,700
  11,290
  11,910
  12,562
  13,246
  13,964
  14,719
  15,512
  16,345
  17,221
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  6,914
  3,185
  3,242
  3,278
  3,294
  3,287
  3,257
  3,204
  3,128
  3,030
  2,909
  2,770
  2,614
  2,443
  2,260
  2,069
  1,872
  1,674
  1,478
  1,288
  1,107
  937
  781
  640
  515
  407
  316
  240
  178
  130
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. It offers products in nine categories, including running, NIKE basketball, the Jordan brand, football, men’s training, women’s training, action sports, sportswear, and golf. The company also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking, and outdoor activities. In addition, it sells sports apparel; and markets apparel with licensed college and professional team and league logos. Further, the company sells a line of performance equipment, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, golf clubs, and other equipment under the NIKE brand name for sports activities; various plastic products to other manufacturers; athletic and casual footwear, apparel, and accessories under the Jumpman trademark; action sports and youth lifestyle apparel and accessories under the Hurley trademark; and casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks. Additionally, it licenses agreements that permit unaffiliated parties to manufacture and sell apparel, digital devices, and applications and other equipment for sports activities under NIKE-owned trademarks. The company sells its products to footwear stores, sporting goods stores, athletic specialty stores, department stores, skate, tennis and golf shops, and other retail accounts through NIKE-owned retail stores and Internet Websites (direct to consumer operations), as well as independent distributors and licensees. The company was formerly known as Blue Ribbon Sports, Inc. and changed its name to NIKE, Inc. in 1971. NIKE, Inc. was founded in 1964 and is headquartered in Beaverton, Oregon.

FINANCIAL RATIOS  of  Nike Cl B (NKE)

Valuation Ratios
P/E Ratio 23.8
Price to Sales 2.8
Price to Book 7.3
Price to Tangible Book
Price to Cash Flow 28.9
Price to Free Cash Flow 45.9
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 18.7%
Cap. Spend. - 3 Yr. Gr. Rate 13.8%
Financial Strength
Quick Ratio 122
Current Ratio 0.1
LT Debt to Equity 16.3%
Total Debt to Equity 16.6%
Interest Coverage 67
Management Effectiveness
Return On Assets 17.8%
Ret/ On Assets - 3 Yr. Avg. 16.5%
Return On Total Capital 26.6%
Ret/ On T. Cap. - 3 Yr. Avg. 24.5%
Return On Equity 30.1%
Return On Equity - 3 Yr. Avg. 27.5%
Asset Turnover 1.5
Profitability Ratios
Gross Margin 46.2%
Gross Margin - 3 Yr. Avg. 45.7%
EBITDA Margin 16.5%
EBITDA Margin - 3 Yr. Avg. 15.9%
Operating Margin 13.9%
Oper. Margin - 3 Yr. Avg. 13.6%
Pre-Tax Margin 14.3%
Pre-Tax Margin - 3 Yr. Avg. 13.6%
Net Profit Margin 11.6%
Net Profit Margin - 3 Yr. Avg. 10.7%
Effective Tax Rate 18.7%
Eff/ Tax Rate - 3 Yr. Avg. 21.6%
Payout Ratio 27.2%

NKE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NKE stock intrinsic value calculation we used $32376 million for the last fiscal year's total revenue generated by Nike Cl B. The default revenue input number comes from 2016 income statement of Nike Cl B. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NKE stock valuation model: a) initial revenue growth rate of 6.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for NKE is calculated based on our internal credit rating of Nike Cl B, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Nike Cl B.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NKE stock the variable cost ratio is equal to 81.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1499 million in the base year in the intrinsic value calculation for NKE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.2% for Nike Cl B.

Corporate tax rate of 27% is the nominal tax rate for Nike Cl B. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NKE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NKE are equal to 5.5%.

Life of production assets of 2.9 years is the average useful life of capital assets used in Nike Cl B operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NKE is equal to 13%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $12258 million for Nike Cl B - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1639.34 million for Nike Cl B is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Nike Cl B at the current share price and the inputted number of shares is $87.3 billion.


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COMPANY NEWS

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▶ Nike: Drastic Changes, Desperate Times?   [12:28PM  Barrons.com]
▶ Today's Top Supply Chain and Logistics News From WSJ   [06:32AM  The Wall Street Journal]
▶ [$$] Nike to Sell Some Items Directly to Amazon   [12:34AM  The Wall Street Journal]
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▶ 5 ways to trade the Nike/Amazon Deal   [05:00PM  CNBC Videos]
▶ Nike teams up with Amazon   [03:16PM  CNBC Videos]
▶ A Nike-Amazon Deal is Near   [03:08PM  Investopedia]
▶ Foot Locker: Time to Buy?   [02:34PM  Barrons.com]
▶ Is Nike joining the Amazon roster?   [01:51PM  Associated Press]
▶ Foot Locker: Et Tu, Nike?   [11:31AM  Barrons.com]
▶ Nike to sell through Amazon?   [09:10AM  CNBC Videos]
▶ Netflix Price Target Hiked, Nvidia Upgraded, Nike PT Lowered   [04:27PM  Investor's Business Daily]
▶ Nike: Running Out of Room?   [12:58PM  Barrons.com]
▶ Stocks Open Lower; Mickey D. Upgraded, Lennar Breaks Out   [09:35AM  Investor's Business Daily]
▶ Under Armour, Inc.'s Most Brilliant Moves in 2017 So Far   [Jun-19-17 03:24PM  Motley Fool]
▶ 2 Hurdles Nike Needs To Clear   [02:59PM  Benzinga]
▶ 3 Stocks That Look Just Like Nike in 1980   [11:09AM  Motley Fool]
▶ 3 Large-Cap Stocks for Astute Investors   [Jun-17-17 01:09PM  Motley Fool]
Stock chart of NKE Financial statements of NKE Annual reports of NKE
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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