Nike’s (NKE) blockbuster earnings report has piqued investor interest. However, given the stock’s relative overvaluation and relatively lower growth potential, athletic apparel and footwear manufacturer Foot Locker (NYSE:FL) seems to be a better investment bet. So, let’s take a closer look. Renowned footwear and athletic apparel manufacturer Nike , Inc. (NYSE:NKE) reported stellar earnings for its fiscal fourth quarter on June 24, reflecting an impressive recovery from last year’s pandemic-driven lows. NKE’s revenues increased 96% year-over-year to $12.30 billion in the fiscal fourth quarter, ended May 31. Its net income and EPS came in at $1.50 billion and $0.93, respectively, demonstrating a substantial improvement from negative year-ago values. The stock of the Beaverton, Ore., concern jumped more than 12% in after-hours trading on the day of its results release. However, we think NKE is significantly overvalued. Its respective 4.79 and 29.96 forward Price/Sales and Price/Cash Flow ratios compare poorly with 1.34 and 14.17 industry averages.
Meanwhile, footwear and accessories manufacturer Foot Locker, Inc. (FL) has emerged as one of NKE’s major competitors, with impressive growth potential. The New York City company's revenues increased 83.1% year-over-year to $2.15 billion in its fiscal first quarter ended May 1. Its net income and EPS improved significantly from negative year-ago values to $202 million and $1.93, respectively. FL’s shares have gained 50.1% year-to-date, while NKE returned 7.7% over this period. And in terms of their past year performance, FL is the clear winner with 108.2% gains versus NKE’s 55.4% returns.
Analysts expect NKE’s revenue and EPS to increase 11.6% and 19.1%, respectively, year-over-year in the current year. FL revenues and EPS, in comparison, are expected to improve 13.5% and 101.8%, respectively, in the current year. We think FL’s impressive growth trajectory NKE’s makes it well positioned to deliver relatively higher returns in the near term.