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Nike Common Stock Valuation

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					                                                Nike
Common Stock Valuation
                         As of May 24, 2010

            By Valentyn Khokhlov, MBA




   Nike Common Stock Valuation - May 24, 2010
                                                            Purpose
The purpose of this valuation is to assess the
fair price of Nike common stock and check if
the stock currently is over- or under-priced.
• The fair price is defined as the price having the same
  multiple to an underlying factor as the average price for
  the group of the comparable companies.
• The valuation performed as of May 24, 2010.
• The underlying factors considered are EBITDA,
  revenue, net earnings and book value of assets.
• The comparable companies are the leading public
  corporations in the textile/footwear industry.



               Nike Common Stock Valuation - May 24, 2010
                                   Executive Summary
• Nike shares seem to be overpriced relative to
  comparable companies using all the multiples
  but the P/E ratio.
• Fair price should be around $57 if valued
  using EV/EBITDA, EV/Sales and M/B ratios.
• Nike shares are almost fairly priced when
  using the P/E ratio: market price is $72, and
  the P/E multiple valuation is about $68.




            Nike Common Stock Valuation - May 24, 2010
                                          Valuation Summary
                          Actual                             Valuated
EV / EBITDA    EBITDA     Multiple     Price     Multiple       EV       Price
 current          2,888      11.06      $72.91        8.90      25,702    $60.06
 trailing         2,810      11.37      $72.91        8.59      24,141    $56.85
 regression       2,888      11.06      $72.91        8.41      24,282    $57.14
EV / Revenue   Revenue    Multiple     Price     Multiple       EV       Price
 current         19,176        1.67     $72.91        1.25      23,991    $56.54
 trailing        18,650        1.71     $72.91        1.20      22,457    $53.38
P/E            Earnings   Multiple     Price     Multiple    MarketCap   Price
 current          1,487      23.82      $72.91      22.33       33,205    $68.36
 trailing         1,730      20.47      $72.91      18.87       32,646    $67.21
M/B             Assets    Multiple     Price     Multiple    MarketCap   Price
 current         13,250        2.67     $72.91        2.12      28,076    $57.81

                      values in these columns are in USD millions




                Nike Common Stock Valuation - May 24, 2010
                                 Market Data




Nike Common Stock Valuation - May 24, 2010
                                Comparable Companies
•   Adidas (ADS:GR)
•   Skechers (SKX)
•   Deckers (DECK)
•   Puma (PUM:GR)
•   Timberland (TBL)
•   Coach Inc. (COH)
•   VF Corporation (VFC)
•   CROCS Inc. (CROX)
•   Steven Madden (SHOO)
•   Lacrosse Footwear (BOOT)
•   Phoenix Footwear Group (PXG)

Note: for some multiples a smaller group of top peer companies
  (shown in bold) was analyzed to derive an alternative multiple.

                 Nike Common Stock Valuation - May 24, 2010
                                                                             Trailing Values
  In millions, except for share price. Values in EUR for Adidas and Puma, and in USD for other companies.
Company           Ticker      Revenue     EBITDA       Net Profit   EV     Market Cap            Shares Share Price
Nike              NKE           18,650       2,810         1,730    31,940     35,410              485.7       72.91
Adidas            ADS:GR                                             9,006      8,255             209.2     € 39.46
Skechers          SKX             1,590        170           103     1,390      1,700               47.4       35.84
Deckers           DECK              835        204           122     1,370      1,720               12.9       133.7
Puma              PUM:GR                                             2,941      3,314              15.1    € 219.50
Timberland        TBL             1,310         127           67       792      1,030               53.6       19.22
Coach Inc.        COH             3,430       1,180          685    10,840     11,730              305.1       38.43
VF Corporation    VFC             7,240       1,100          524     9,050      8,580              110.1       77.89
CROCS Inc.        CROX              678          63          (14)      744        794              85.79        9.26
Steven Madden     SHOO              528         104           59       805        892              27.58       32.34
Lacrosse Footwear BOOT              147          15            8       103        122                 6.4       19.1
                  PXG
Phoenix Footwear Group               20          (6)          (5)        7          4               8.17         0.5



   • The trailing (TTM) values, as well as EV and market capitalization are
     used as per Yahoo! Finance, http://finance.yahoo.com.
   • EV for Adidas and Puma, which aren’t listed on Yahoo! Finance, are as per
     http://www.infinancials.com/en/financial%20ratio,adidas%20AG,30045ED.html,
     converted into EUR using 1.2488 USD/EUR rate.
   • Market capitalization for Adidas and Puma are calculated using the current
     market price and the amount of shares outstanding as per the last annual
     report.


                               Nike Common Stock Valuation - May 24, 2010
                                                                             Current Values
  In millions, except for share price. Values in EUR for Adidas and Puma, and in USD for other companies.
Company           Ticker      Revenue     EBITDA EBITDA % Net Profit          Assets             Shares Share Price
Nike              NKE           19,176       2,888    15.06%  1,487             13,250              395.7    $72.91
Adidas            ADS:GR        10,381         978     9.42%    245              8,875             209.2    € 39.46
Skechers          SKX            1,436         154    10.71%     55                996              35.8     $35.84
Deckers           DECK             813         198    24.40%    117                599              12.9    $133.70
Puma              PUM:GR         2,461         249    10.11%    128              2,014              15.1   € 219.50
Timberland        TBL            1,286         125     9.70%     57                860              42.7     $19.22
Coach Inc.        COH            3,231       1,113    34.44%    623              2,564             305.1     $38.43
VF Corporation    VFC            7,220       1,094    15.15%    461              6,471             110.1     $77.89
CROCS Inc.        CROX             646          60     9.35%    (42)               410              85.8      $9.22
Steven Madden     SHOO             504          99    19.62%     50                327              27.5     $32.70
Lacrosse Footwear BOOT             139          14    10.23%      6                 89               6.4     $19.25
                  PXG
Phoenix Footwear Group              20          (6)  -31.79%     (7)                15               8.2      $0.50



   • The current values, i.e. values as per the last annual report, are taken from
     the Bloomberg Business Week,
     http://investing.businessweek.com/businessweek/.
   • EBITDA is estimated using the EBITDA to sales ratio.




                               Nike Common Stock Valuation - May 24, 2010
                  Multiples Valuation




Nike Common Stock Valuation - May 24, 2010
                                                 Current EV/EBITDA
                                        full peer group                top peers
     Company         Ticker      EV         EBITDA    EV/EBITDA     EV       EV/EBITDA
Adidas             ADS:GR          9,006         978         9.21                  9.21
Skechers           SKX             1,390         154         9.04
Deckers            DECK            1,370         198         6.90
Puma               PUM:GR          2,941         249       11.82                   11.82
Timberland         TBL               792         125         6.35
Coach Inc.         COH            10,840       1,113         9.74                   9.74
VF Corporation     VFC             9,050       1,094         8.27                   8.27
CROCS Inc.         CROX              744          60       12.32
Steven Madden      SHOO              805          99         8.15
Lacrosse Footwear BOOT               103          14         7.21
                   PXG
Phoenix Footwear Group                 7          (6)       -1.06
Nike               NKE            25,702       2,888         8.90   28,191          9.76

average                                                      8.90                   9.76
median                                                       8.65                   9.48
std.deviation                                                1.98                   1.50
std.error of the mean                                        0.63                   0.75
95% confidence for the mean          7.67        10.13
90% confidence for the mean          7.87         9.93




                       Nike Common Stock Valuation - May 24, 2010
                                                Trailing EV/EBITDA
                                       full peer group                 top peers
     Company         Ticker      EV         EBITDA    EV/EBITDA     EV       EV/EBITDA
Adidas             ADS:GR          9,006         978         9.21                  9.21
Skechers           SKX             1,390         170         8.19
Deckers            DECK            1,370         204         6.72
Puma               PUM:GR          2,941         249       11.82                   11.82
Timberland         TBL               792         127         6.25
Coach Inc.         COH            10,840       1,180         9.19                   9.19
VF Corporation     VFC             9,050       1,100         8.23                   8.23
CROCS Inc.         CROX              744          63       11.74
Steven Madden      SHOO              805         104         7.77
Lacrosse Footwear BOOT               103          15         6.80
                   PXG
Phoenix Footwear Group                 7          (6)       -1.05
Nike               NKE            24,141       2,810         8.59   27,007          9.61

average                                                      8.59                   9.61
median                                                       8.21                   9.20
std.deviation                                                1.95                   1.54
std.error of the mean                                        0.62                   0.77
95% confidence for the mean          7.38        9.80
90% confidence for the mean          7.58        9.61




                       Nike Common Stock Valuation - May 24, 2010
                                                Current EV/Revenue
                                         full peer group                  top peers
       Company            Ticker      EV        Revenue       EV/Sales    EV       EV/Sales
Adidas                   ADS:GR         9,006      10,381          0.87                0.87
Skechers                 SKX            1,390       1,436          0.97
Deckers                  DECK           1,370         813          1.68
Puma                     PUM:GR         2,941       2,461          1.19                1.19
Timberland               TBL              792       1,286          0.62
Coach Inc.               COH           10,840       3,231          3.36                3.36
VF Corporation           VFC            9,050       7,220          1.25                1.25
CROCS Inc.               CROX             744         646          1.15
Steven Madden            SHOO             805         504          1.60
Lacrosse Footwear        BOOT             103         139          0.74
Phoenix Footwear Group   PXG                7          20          0.34
Nike                     NKE           23,991      19,176          1.25   23,475       1.22

average                                                            1.25                1.67
median                                                             1.15                1.22
std.deviation                                                      0.81                1.14
std.error of the mean                                              0.24                0.57
95% confidence for the mean              0.78          1.73
90% confidence for the mean              0.85          1.65




                         Nike Common Stock Valuation - May 24, 2010
                                                Trailing EV/Revenue
                                         full peer group                  top peers
       Company            Ticker      EV        Revenue       EV/Sales    EV       EV/Sales
Adidas                   ADS:GR         9,006      10,381          0.87                0.87
Skechers                 SKX            1,390       1,590          0.87
Deckers                  DECK           1,370         835          1.64
Puma                     PUM:GR         2,941       2,461          1.19                1.19
Timberland               TBL              792       1,310          0.60
Coach Inc.               COH           10,840       3,430          3.16                3.16
VF Corporation           VFC            9,050       7,240          1.25                1.25
CROCS Inc.               CROX             744         678          1.10
Steven Madden            SHOO             805         528          1.52
Lacrosse Footwear        BOOT             103         147          0.70
Phoenix Footwear Group   PXG                7          20          0.34
Nike                     NKE           22,457      18,650          1.20   22,800       1.22

average                                                            1.20                1.62
median                                                             1.10                1.22
std.deviation                                                      0.76                1.04
std.error of the mean                                              0.23                0.52
95% confidence for the mean              0.76          1.65
90% confidence for the mean              0.83          1.58




                         Nike Common Stock Valuation - May 24, 2010
                                                                    Current P/E
                                          full peer group                top peers
       Company            Ticker   Market Cap    Net Profit    P/E     Market Cap    P/E
Adidas                   ADS:GR         8,255           245      33.69                33.69
Skechers                 SKX            1,700            55      31.08
Deckers                  DECK           1,720           117      14.73
Puma                     PUM:GR         3,314           128      25.85                25.85
Timberland               TBL            1,030            57      18.20
Coach Inc.               COH           11,730           623      18.82                18.82
VF Corporation           VFC            8,580           461      18.60                18.60
CROCS Inc.               CROX             794           (42)
Steven Madden            SHOO             892            50      17.80
Lacrosse Footwear        BOOT             122             6      22.24
Phoenix Footwear Group   PXG                4            (7)
Nike                     NKE           33,205         1,487      22.33    36,039      24.24

average                                                          22.33                24.24
median                                                           18.82                22.33
std.deviation                                                     6.52                 7.15
std.error of the mean                                             2.17                 3.57
95% confidence for the mean              18.08        26.59
90% confidence for the mean              18.76        25.91




                         Nike Common Stock Valuation - May 24, 2010
                                                                    Trailing P/E
                                          full peer group                top peers
       Company            Ticker   Market Cap    Net Profit    P/E     Market Cap    P/E
Adidas                   ADS:GR         8,255           245      33.69                33.69
Skechers                 SKX            1,700           103      16.54
Deckers                  DECK           1,720           122      14.06
Puma                     PUM:GR         3,314           128      25.85                25.85
Timberland               TBL            1,030            67      15.49
Coach Inc.               COH           11,730           685      17.12                17.12
VF Corporation           VFC            8,580           524      16.38                16.38
CROCS Inc.               CROX             794           (14)
Steven Madden            SHOO             892            59      15.14
Lacrosse Footwear        BOOT             122             8      15.56
Phoenix Footwear Group   PXG                4            (5)
Nike                     NKE           32,646         1,730      18.87    40,242      23.26

average                                                          18.87                23.26
median                                                           16.38                21.49
std.deviation                                                     6.54                 8.18
std.error of the mean                                             2.18                 4.09
95% confidence for the mean              14.59        23.15
90% confidence for the mean              15.28        22.46




                         Nike Common Stock Valuation - May 24, 2010
                                                                   Current M/B
                                          full peer group                top peers
       Company            Ticker   Market Cap     Assets       M/B     Market Cap    M/B
Adidas                   ADS:GR         8,255        8,875        0.93                 0.93
Skechers                 SKX            1,700          996        1.71
Deckers                  DECK           1,720          599        2.87
Puma                     PUM:GR         3,314        2,014        1.65                 1.65
Timberland               TBL            1,030          860        1.20
Coach Inc.               COH           11,730        2,564        4.57                 4.57
VF Corporation           VFC            8,580        6,471        1.33                 1.33
CROCS Inc.               CROX             794          410        1.94
Steven Madden            SHOO             892          327        2.73
Lacrosse Footwear        BOOT             122           89        1.38
Phoenix Footwear Group   PXG                4           15
Nike                     NKE           26,898       13,250        2.03    28,076       2.12

average                                                           2.03                 2.12
median                                                            1.68                 1.49
std.deviation                                                     1.09                 1.66
std.error of the mean                                             0.35                 0.83
95% confidence for the mean               1.35          2.71
90% confidence for the mean               1.46          2.60




                         Nike Common Stock Valuation - May 24, 2010
                       EV/EBITDA
               Regression Analysis




Nike Common Stock Valuation - May 24, 2010
                                            Regression Model
• The model used to calculate EV/EBITDA multiple as a
  function of key inputs multiplied by regression
  coefficients rather than a simple statistic.
• The key determinants of the EV/EBITDA ratio are:
   –   Tax rate (effective tax rate assessed),
   –   Depreciation & amortization to EBITDA (DA/EBITDA ratio),
   –   Capital expenditures to EBITDA (Capex/EBITDA ratio),
   –   Increase in working capital to EBITDA (dWC/EBITDA ratio),
   –   Revenue growth rate (not included: no reliable data).
• Values from the latest annual reports used as inputs.
• The regression was run on 9 peer companies, the
  resulting R2 is 0.61.



                 Nike Common Stock Valuation - May 24, 2010
                                                          EV/EBITDA Regression


    Company           Ticker   EV, m    EBITDA, m   EV/EBITDA Tax Rate DA/EBITDA    Capex/EBITDA dWC/EBITDA
Adidas               ADS:GR     9,006         978          9.21  31.6%     0.2700           0.1830   -0.7353
Skechers             SKX        1,390         154          9.04  28.4%     0.1339           0.2295   -0.2217
Deckers              DECK       1,370         198          6.90  36.2%     0.0514           0.0690   -0.2263
Puma                 PUM:GR     2,941         249         11.82  31.6%     0.2183           0.2118   -0.5290
Timberland           TBL          792         125          6.35  30.3%     0.2309           0.1419   -0.3495
Coach Inc.           COH       10,840       1,113          9.74  36.2%     0.1106           0.2160   -0.0588
VF Corporation       VFC        9,050       1,094          8.27  30.0%     0.1559           0.0785   -0.2371
CROCS Inc.           CROX         744          60         12.32   0.0%     0.6078           0.2915   -0.2153
Steven Madden        SHOO         805          99          8.15  38.0%     0.0972           0.0344    0.0385

regression coefficients:                                         6.5695    7.3581         14.6181     1.2023   3.6142

Nike                 NKE       24,282       2,888         8.41   24.0%     0.1201          0.1467     0.1562

Nike: actual                   31,940       2,888        11.06



   The EV/EBITDA formula as assessed using the regression is:
   6.5695 x (Tax rate) + 7.3581 x (DA/EBITDA) + 14.6181 x (Capex/EBITDA) +
   + 1.2023 x (dWC/EBITDA) + 3.6142



                                    Nike Common Stock Valuation - May 24, 2010

				
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