3 Great Reasons Nike Stock Is A Buy

Nike Inc (NYSE:NKE) is one of the largest and most well known sports apparel brands in the world. With a market cap of a little over $87.21 billion, they are a giant. Nike’s principal business activity involves the design, development and worldwide marketing of high quality footwear, apparel, equipment, and accessory products. The company sells its products to retail accounts in the United States and through a mix of independent distributors, licensees and subsidiaries in numerous countries around the world.

Between its Nike and Jordan Brand lines, the company controls 62% of the athletic footwear brand market share, which is more than four times the combined values of its competitors of Adidas (XETRA:ADSGN), Skechers (NYSE:SKX), and Asics (TOKYO:7936). The company currently has 322 stores in the US and 536 non-US retail stores. Nike can be found is nearly 50 countries worldwide.

With consumers becoming more health conscious and increasing exercise levels, along with the increased popularity of the “casual comfort” fashion style, the demand for sportswear is increasing, and Nike definitely stands to benefit.

This is part of why Nike is such a compelling investment these days, though that is by no means the only reason. In fact, NKE finds itself in the top 13% of all industries, while it is also seeing strong growth prospects as well. Below, we highlight in greater detail three of the best reasons to buy NKE stock now, and how this dominant player in the space could continue to grow despite its already massive size:

1. Strong Growth Numbers

Nike has seen strong sales growth numbers across the board in their regions. As of late, the dollar has been strong against a number of currencies, and in the case of the euro especially, it is not likely that it will continually decrease in worth greatly each quarter, so in this case it pays to view the company’s revenue numbers excluding currency issues.

When using constant currencies, Western Europe saw the greatest growth of any region at 21%, with Greater China in a close second with 17% growth. Central and Eastern Europe increased by 7%, and the company’s emerging markets sector revenues grew 12%.

According to their investors report for the third quarter of 2015, overall revenues have increased by 7% to $7.5 billion, and growth was 13% excluding currency issues. These numbers show that even being such a large company already, NIKE still has the capability and leadership to continue to grow, and at significant rates no less.

2. Improving Profit Margins

Increased growth is always something that investors enjoy seeing in a company that they are analyzing. But a company that is growing revenues and increasing the amount of profits they make on their revenues? That is something that investors love to see.

In the report from NKE, the company states that net income increased 16% in the third quarter, up to $791 million. The company’s success in increasing their profit margins stems from the continuation of a shift to higher margined products, where the selling price is a significant amount more than the cost of its production.

3. Trust the Experts

Nike Inc. is currently a Zacks Rank #2 (Buy) and for good reason. We expect EPS growth of 19.79% for this year, while not a single analyst in our consensus has slashed estimates for this time frame in the past 60 days.

Nike’s earnings returns are promising and the company has shown the ability to consistently beat estimates. Nike has had an average earnings surprise of 9.54% over its last four earnings reports, so there is no reason to think that it can’t continue to match lofty analyst expectations in the quarters ahead.

Nike’s largest earnings surprise came last year, after the summer in their quarter ending 8/2014 with a 23.86% surprise. If Nike can have anywhere near the success the company had last summer, the next earnings report has the possibility of showing extremely strong numbers.

Bottom Line

With increasing numbers of individuals getting more into exercise and increasing popularity of the casual comfort fashion trend, the sportswear industry stands to gain immensely. Nike, with a capability for and history of growth, and an improving profit margin, is in position to be extremely successful for itself and its investors moving forward.

The company posted incredibly successful numbers after last summer in their earnings report, and with substantial growth numbers continuing over the last two quarters, Nike is very likely to post great numbers once again at its next earnings report date in August 2015. The stock is definitely worth a closer look by investors seeking a top pick in the consumer sector.

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