NIKE, INC. 'B' NYSE-NKE STOCK INDEX 7.9% IPE TrailingRELATIVE VALUE PRICE YLD LINE TIMELINESS 3 Lowered 10/23/20 High: 16.7 23.1 24.6 28.7 40.1 49.9 68.2 65.4 65.2 86.0 101.8 131.3 Target Price Range Low: 9.6 15.2 17.4 21.3 25.7 34.9 45.3 49.0 50.3 62.1 71.2 60.0 SAFETY 1 Raised 811/06 LEGENDS 2023 2024 2025 16.0 x "Cash Flow" p sh TECHNICAL 3 Lowered 10/23/20 ... Relative Price Strength - 160 2-for-1 split 1212 BETA 1.10 (1.00 = Market) 2-for-1 split 12/15 120 2.liar 1 -100 18-Month Target Price Range Shaded area indicates recession .80 Low-High Midpoint (% to Mid) 60 -60 $52-$160 $106 (-20%) -50 .40 2023-25 PROJECTIONS Ann'l Total -30 Price Gain Return High 140 (+10%) 3% 20 Low 115 (-10%) -2%, - -15 " Institutional Decisions - % TOT. RETURN 9/20 THIS VL ARITH . 402019 102020 202020 Percent 30 to Buy 967 842 964 shares 1 yr. 35.0 20+ 0.8 to Sel 664 916 766 traded 10 LLINA 3 yr. 150.1 7.9 Hid s/000102490510079701005810 5 yr. 116.1 47.8 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 VALUE LINE PUB. LLC 23-25 5.82 6.54 7.22 8.10 9.48 9.87 9.82 10.97 13.17 14.16 15.98 17.85 19.25 20.91 22.73 24.95 24.01 27.05 Sales per shA 37.65 .59 .66 .80 .86 1.04 1.06 1.15 1.30 1.42 1.62 1.85 2.26 2.62 3.01 2.95 3.02 2.35 3.30 "Cash Flow" per sh 7.25 44 56 .66 .72 .86 .88 97 1.10 1.18 1.35 1.49 1.85 2.16 2.51 2.40 2.49 1.85 2.85 Earnings per sh AB 6.30 .09 .12 .15 .18 .22 .25 27 30 .35 .41 47 .54 .62 .70 .78 .86 .93 1.00 Div'ds Decl'd per sh CD. 1.40 .10 .12 .16 .16 .23 .23 .17 23 33 .36 51 .56 .68 .67 .64 .71 .70 .75 Cap'l Spending per sh .95 2.27 2.69 3.03 3.49 3.98 4.48 5.04 5.18 5.67 6.24 6.22 7.41 7.29 7.55 6.13 5.77 5.17 5.95 Book Value per sh 9.00 2104.8 2100.8 2072.0 2015.2 1964.4 1942.0 1936.0 1902.0 1832.0 1788.0 1740.0 1714.0 1682.0 1643.0 1601.0 1568.0 1558.0 1550.0 Common Shs Outst'g EF 1500.0 18.4 17.9 16.0 16.5 17.8 15.3 16.4 18.2 20.4 19.4 24.2 24.4 27.5 21.6 25.3 32.0 48.6 Avg Ann' P/E Ratio 20.0 .97 .95 .86 .88 1.07 1.02 1.04 1.14 1.30 1.09 1.27 1.23 1.44 1.09 1.37 1.70 2.40 Relative P/E Ratio 1.10 1.1% 1.2% 1.4% 1.5% 1.4% 1.8% 1.7% 1.5% 1.4% 1.5% 1.3% 1.2% 1.0% 1.3% 1.3% 1.1% 1.0% Avg Ann'l Div'd Yield 1.1% CAPITAL STRUCTURE as of 8/31/20 19014 20862 24128 25313 2531327799 30601 32376 34350 36397 39117 37403 41950 Sales (Smill) A 56500 Total Debt $9546 mill. Due in 5 Yrs $4800 mill. 147% 15.1% 15.1% 14.1% 14.6% 15.1% 15.6% 15.9% 15.9% 14.3% 14.0% 11.3% 11.3% 14.2% Operating Margin LT Debt $9408 mill. 19.0% LT Interest $515 mill. 323.7 335.0 373.0 438.0 518.0 (51% of Capital) 606.0 649.0 706.0 747.0 705.0 721.0 725 Depreciation (Smill) 900 1906.7 2133.0 2223.0 2464.0 2693.0 3273.0 3760.0 4240.0 3974.0 4029.0 2937.0 4420 Net Profit (Smill) 9450 Leases, Uncapitalized Annual rentals $553 mill. 24.2% 25.0% 25.5% 24.7% 24.0% 22.2% 18.7% 13.2% 8.1% 16.1% 10.6% 18.0% Income Tax Rate 21.0% Defined Benefit Pension Plan 10.0% 10.2% 9.2% 9.7% 9.7% 10.7% 11.6% 12.3% 10.9% 10.3% 10.5% Net Profit Margin 16.7% 7595.0 7339.0 7666.0 9700.0 8669.0 9642.0 9667.0 10587 9094.0 8659.0 12272 13300 Working Cap'l (Smill) 15000 Preferred Stock None Common Stock 1,555,372,768 shares 445.8 276.0 228.0 1210.0 1199.0 1079.0 2010.0 3471.0 3468.0 3464.0 9406.0 6500 Long-Term Debt ($mill) 5000 Class A shares: 315,017, 252 9753.7 9843.0 10381 11156 10824 12707 12258 12407 9812.0 9040.0 8055.0 9200 Shr. Equity (Smill) 13500 Class B shares: 1,240,355,515 18.7% 21.1% 21.0% 20.0% 22.6% 23.8% 26.5% 26.9% 30.3% 32.7% 17.6% 29.5% Return on Total Cap'l 52.0% 19.5% 21.7% 21.4% 22.1% 24.9% 25.8% 30.7% 34.2% 40.5% 44.6% 36.5% 48.0% Return on Shr. Equity 70.0% MARKET CAP: $201 billion (Large Cap) 14.4% 16.0% 15.5% 15.8% 17.5% 18.7% 22.3% 25.0% 27.8% 29.8% 18.4% 31.0% Retained to Com Eq 54.5% CURRENT POSITION 2019 2020 8/31/20 27% 26% 28% 29% 30% 27% 27% 27% 31% 33% (SMILL) 49% 35% All Div'ds to Net Prof 22% Cash Assets 4663 8787 9480 BUSINESS: NIKE designs, develops, and markets footwear, ap- is another product line for kids. Has about 76,700 employees (in- Receivables 4272 2749 3813 parel, equipment, and accessories. Sells products to retail ac- Inventory (LIFO) 5622 7367 6705 cluding part-timers). Swoosh, LLC, owns 74.9% Cl. A shares, Other 1968 1653 1939 counts, through NIKE-owned stores and the internet, and through a 15.9% CI. B; offs./dirs., 3.8% of Cl. B; Vanguard, 8.6%; BlackRock, Current Assets 16525 20556 21937 mix of independent distributors and licensees in numerous coun- 7.2% (7/20 proxy). Chairman: Mark G. Parker. CEO: John Accts Payable 2612 2248 1983 tries. Offerings are focused in six categories: running, basketball, Donahoe. Inc.: Oregon. Addr.: One Bowerman Drive, Beaverton, Debt Due 15 251 138 the Jordan brand, football (soccer), training, and sportswear. There OR 97005. Tel: 503-671-6453. Internet: www.nikeinc.com. Other 5239 5785 Current Liab. 7866 8284 8619 NIKE shares have risen more than touch with younger shoppers has 30% in value over the past_three faded fast. Several quarters ago there ANNUAL RATES Past Past Estd 18-20 months to fresh all-time highs. The fis- was a poor reading from the company's vi- of change (per sh) 10 Yrs. 5 Yrs. to 23-25 Sales 9.5% 8.5% 9.5% cal first-quarter report (years end May tal North American business. The selloff "Cash Flow" 10.0% 7.5% 21.0% 31st) was a major driver behind the in- following this disclosure proved to be Earnings 9.5% 7.5% 23.0% cline, as digital sales soared more than much ado about nothing, but at the time a Dividends 13.5% 13.0% 11.0% Book Value 2.5% -3.0% 9.5% 80% year over year. This strong showing failure to connect with the youth of Amer- overcompensated for shortcomings on the ica was cited. The swoosh poured money Fiscal QUARTERLY SALES ($ mill.) A Full Fiscal wholesale side of operations and the shut- into its Web site and made customization Ends Aug.31 Nov.30 Feb.28 May 31 Year tering of some stores due to the 2017 9061 8180 a priority to appease the millennial gener- 8432 8677 34360 coronavirus pandemic. North American ation and sales in this region perked up in 2018 9070 8554 8984 9789 36397 receipts actually dipped 2%, but that num- tandem. In early October, a survey 2019 9948 9374 9611 10184 39117 2020 (10660 10326 10104 6313 37403 ber was applauded given the tough, un- revealed that NIKE has maintained its 2021 10594 10550 10790 11100 41950 precedented COVID-19 backdrop. top-ranking for apparel brands among Fiscal EARNINGS PER SHARE AB Even with the negative effects of the teenagers, a title it has held for a decade Full et des Aug.31 Nov.30 Feb.28 May 31 Fleca pandemic, we think earnings will now. In fact, its market share in this space Year reach record levels this fiscal year. We was up four percentage points, to 27%. 2017 .73 .50 .68 .60 2.51 have dialed our call up by $0.45 a share, to All the good news looks to be already 2018 .57 .46 .68 .69 2.40 $2.85. NIKE has proven it can thrive in baked into this high-quality, neutrally 2019 .67 52.68 .62 2.49 2020 .86 .70 the digital world and we expect things to ranked, selection's quotation. NIKE is .78 d.51 2021 .95 .60 .75 .55 2.85 be more normalized with regard to shop- the cream of the crop in the shoe industry ping patterns in the back half of the year. and deserves a handsome premium as a Cal- QUARTERLY DIVIDENDS PAID C Full endar Mar 31 Jun 30 Sep.30 Dec.31 If so, annual sales should eclipse the $40 result. Still,_the lofty price tag sits well Year billion mark for the first time in company within our Target Price Range three to 2016 .16 .16 .16 .16 2017 64 history. Healthy sales gains at the Jordan five years hence. This leaves very little .18 .18 .18 18 2018 .20 2 brand will get a good bit of the credit as- long-term appreciation potential for new 20 20 .20 2019 22 .22 22 .22 .88 suming such an accomplishment occurs. accounts. 2020 245 245 245 .245 The belief that NIKE was losing its Erik M. Manning October 23. 2020 (A) Fiscal years and May 31st. (B) Diluted change in share count. Next egs. report due available. (D) Includes 21 dividend paid De- Company's Financial Strength A++ earnings. Excludes nonrecurring: 07, 20; "08, mid-December cember 2012. (E) In millions, adjusted for Stock's Price Stability 75 8c; '09 (130); '13, 10; '18, ($1.23) due to tax (C) Dividends historically paid in early January, splits. (F) Each share of Class A is convertible Price Growth Persistence 85 law change; '20, (250). May not sum due to April, July, and October. Reinvestment plan to one share of Class B. Earnings Predictability 85 , . and is THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber's own, non-commercial, intemal use. No part to subscribe call 1-800-VALUELINE of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. Year What is the FCFE terminal value in year 2025 if the long term growth rate in FCFE is assumed to be 3%? $230,453 million $243,569 million O $152.472 million O $329,564 million Question 27 What is the present value of the FCFE terminal value? $230,596 million O $242.542 million O $101.401 million O $326,854 million D Question 28 What is the equity value using the FCFE model? $119,075 million $422.203 million $326,456 million O $233,093 million Question 29 What is the value of NIKE's shares using the FCFE model if he company has 1,558 million shares outstanding? $22.64 O $110.32 $164.38 $76.43 NIKE, INC. 'B' NYSE-NKE STOCK INDEX 7.9% IPE TrailingRELATIVE VALUE PRICE YLD LINE TIMELINESS 3 Lowered 10/23/20 High: 16.7 23.1 24.6 28.7 40.1 49.9 68.2 65.4 65.2 86.0 101.8 131.3 Target Price Range Low: 9.6 15.2 17.4 21.3 25.7 34.9 45.3 49.0 50.3 62.1 71.2 60.0 SAFETY 1 Raised 811/06 LEGENDS 2023 2024 2025 16.0 x "Cash Flow" p sh TECHNICAL 3 Lowered 10/23/20 ... Relative Price Strength - 160 2-for-1 split 1212 BETA 1.10 (1.00 = Market) 2-for-1 split 12/15 120 2.liar 1 -100 18-Month Target Price Range Shaded area indicates recession .80 Low-High Midpoint (% to Mid) 60 -60 $52-$160 $106 (-20%) -50 .40 2023-25 PROJECTIONS Ann'l Total -30 Price Gain Return High 140 (+10%) 3% 20 Low 115 (-10%) -2%, - -15 " Institutional Decisions - % TOT. RETURN 9/20 THIS VL ARITH . 402019 102020 202020 Percent 30 to Buy 967 842 964 shares 1 yr. 35.0 20+ 0.8 to Sel 664 916 766 traded 10 LLINA 3 yr. 150.1 7.9 Hid s/000102490510079701005810 5 yr. 116.1 47.8 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 VALUE LINE PUB. LLC 23-25 5.82 6.54 7.22 8.10 9.48 9.87 9.82 10.97 13.17 14.16 15.98 17.85 19.25 20.91 22.73 24.95 24.01 27.05 Sales per shA 37.65 .59 .66 .80 .86 1.04 1.06 1.15 1.30 1.42 1.62 1.85 2.26 2.62 3.01 2.95 3.02 2.35 3.30 "Cash Flow" per sh 7.25 44 56 .66 .72 .86 .88 97 1.10 1.18 1.35 1.49 1.85 2.16 2.51 2.40 2.49 1.85 2.85 Earnings per sh AB 6.30 .09 .12 .15 .18 .22 .25 27 30 .35 .41 47 .54 .62 .70 .78 .86 .93 1.00 Div'ds Decl'd per sh CD. 1.40 .10 .12 .16 .16 .23 .23 .17 23 33 .36 51 .56 .68 .67 .64 .71 .70 .75 Cap'l Spending per sh .95 2.27 2.69 3.03 3.49 3.98 4.48 5.04 5.18 5.67 6.24 6.22 7.41 7.29 7.55 6.13 5.77 5.17 5.95 Book Value per sh 9.00 2104.8 2100.8 2072.0 2015.2 1964.4 1942.0 1936.0 1902.0 1832.0 1788.0 1740.0 1714.0 1682.0 1643.0 1601.0 1568.0 1558.0 1550.0 Common Shs Outst'g EF 1500.0 18.4 17.9 16.0 16.5 17.8 15.3 16.4 18.2 20.4 19.4 24.2 24.4 27.5 21.6 25.3 32.0 48.6 Avg Ann' P/E Ratio 20.0 .97 .95 .86 .88 1.07 1.02 1.04 1.14 1.30 1.09 1.27 1.23 1.44 1.09 1.37 1.70 2.40 Relative P/E Ratio 1.10 1.1% 1.2% 1.4% 1.5% 1.4% 1.8% 1.7% 1.5% 1.4% 1.5% 1.3% 1.2% 1.0% 1.3% 1.3% 1.1% 1.0% Avg Ann'l Div'd Yield 1.1% CAPITAL STRUCTURE as of 8/31/20 19014 20862 24128 25313 2531327799 30601 32376 34350 36397 39117 37403 41950 Sales (Smill) A 56500 Total Debt $9546 mill. Due in 5 Yrs $4800 mill. 147% 15.1% 15.1% 14.1% 14.6% 15.1% 15.6% 15.9% 15.9% 14.3% 14.0% 11.3% 11.3% 14.2% Operating Margin LT Debt $9408 mill. 19.0% LT Interest $515 mill. 323.7 335.0 373.0 438.0 518.0 (51% of Capital) 606.0 649.0 706.0 747.0 705.0 721.0 725 Depreciation (Smill) 900 1906.7 2133.0 2223.0 2464.0 2693.0 3273.0 3760.0 4240.0 3974.0 4029.0 2937.0 4420 Net Profit (Smill) 9450 Leases, Uncapitalized Annual rentals $553 mill. 24.2% 25.0% 25.5% 24.7% 24.0% 22.2% 18.7% 13.2% 8.1% 16.1% 10.6% 18.0% Income Tax Rate 21.0% Defined Benefit Pension Plan 10.0% 10.2% 9.2% 9.7% 9.7% 10.7% 11.6% 12.3% 10.9% 10.3% 10.5% Net Profit Margin 16.7% 7595.0 7339.0 7666.0 9700.0 8669.0 9642.0 9667.0 10587 9094.0 8659.0 12272 13300 Working Cap'l (Smill) 15000 Preferred Stock None Common Stock 1,555,372,768 shares 445.8 276.0 228.0 1210.0 1199.0 1079.0 2010.0 3471.0 3468.0 3464.0 9406.0 6500 Long-Term Debt ($mill) 5000 Class A shares: 315,017, 252 9753.7 9843.0 10381 11156 10824 12707 12258 12407 9812.0 9040.0 8055.0 9200 Shr. Equity (Smill) 13500 Class B shares: 1,240,355,515 18.7% 21.1% 21.0% 20.0% 22.6% 23.8% 26.5% 26.9% 30.3% 32.7% 17.6% 29.5% Return on Total Cap'l 52.0% 19.5% 21.7% 21.4% 22.1% 24.9% 25.8% 30.7% 34.2% 40.5% 44.6% 36.5% 48.0% Return on Shr. Equity 70.0% MARKET CAP: $201 billion (Large Cap) 14.4% 16.0% 15.5% 15.8% 17.5% 18.7% 22.3% 25.0% 27.8% 29.8% 18.4% 31.0% Retained to Com Eq 54.5% CURRENT POSITION 2019 2020 8/31/20 27% 26% 28% 29% 30% 27% 27% 27% 31% 33% (SMILL) 49% 35% All Div'ds to Net Prof 22% Cash Assets 4663 8787 9480 BUSINESS: NIKE designs, develops, and markets footwear, ap- is another product line for kids. Has about 76,700 employees (in- Receivables 4272 2749 3813 parel, equipment, and accessories. Sells products to retail ac- Inventory (LIFO) 5622 7367 6705 cluding part-timers). Swoosh, LLC, owns 74.9% Cl. A shares, Other 1968 1653 1939 counts, through NIKE-owned stores and the internet, and through a 15.9% CI. B; offs./dirs., 3.8% of Cl. B; Vanguard, 8.6%; BlackRock, Current Assets 16525 20556 21937 mix of independent distributors and licensees in numerous coun- 7.2% (7/20 proxy). Chairman: Mark G. Parker. CEO: John Accts Payable 2612 2248 1983 tries. Offerings are focused in six categories: running, basketball, Donahoe. Inc.: Oregon. Addr.: One Bowerman Drive, Beaverton, Debt Due 15 251 138 the Jordan brand, football (soccer), training, and sportswear. There OR 97005. Tel: 503-671-6453. Internet: www.nikeinc.com. Other 5239 5785 Current Liab. 7866 8284 8619 NIKE shares have risen more than touch with younger shoppers has 30% in value over the past_three faded fast. Several quarters ago there ANNUAL RATES Past Past Estd 18-20 months to fresh all-time highs. The fis- was a poor reading from the company's vi- of change (per sh) 10 Yrs. 5 Yrs. to 23-25 Sales 9.5% 8.5% 9.5% cal first-quarter report (years end May tal North American business. The selloff "Cash Flow" 10.0% 7.5% 21.0% 31st) was a major driver behind the in- following this disclosure proved to be Earnings 9.5% 7.5% 23.0% cline, as digital sales soared more than much ado about nothing, but at the time a Dividends 13.5% 13.0% 11.0% Book Value 2.5% -3.0% 9.5% 80% year over year. This strong showing failure to connect with the youth of Amer- overcompensated for shortcomings on the ica was cited. The swoosh poured money Fiscal QUARTERLY SALES ($ mill.) A Full Fiscal wholesale side of operations and the shut- into its Web site and made customization Ends Aug.31 Nov.30 Feb.28 May 31 Year tering of some stores due to the 2017 9061 8180 a priority to appease the millennial gener- 8432 8677 34360 coronavirus pandemic. North American ation and sales in this region perked up in 2018 9070 8554 8984 9789 36397 receipts actually dipped 2%, but that num- tandem. In early October, a survey 2019 9948 9374 9611 10184 39117 2020 (10660 10326 10104 6313 37403 ber was applauded given the tough, un- revealed that NIKE has maintained its 2021 10594 10550 10790 11100 41950 precedented COVID-19 backdrop. top-ranking for apparel brands among Fiscal EARNINGS PER SHARE AB Even with the negative effects of the teenagers, a title it has held for a decade Full et des Aug.31 Nov.30 Feb.28 May 31 Fleca pandemic, we think earnings will now. In fact, its market share in this space Year reach record levels this fiscal year. We was up four percentage points, to 27%. 2017 .73 .50 .68 .60 2.51 have dialed our call up by $0.45 a share, to All the good news looks to be already 2018 .57 .46 .68 .69 2.40 $2.85. NIKE has proven it can thrive in baked into this high-quality, neutrally 2019 .67 52.68 .62 2.49 2020 .86 .70 the digital world and we expect things to ranked, selection's quotation. NIKE is .78 d.51 2021 .95 .60 .75 .55 2.85 be more normalized with regard to shop- the cream of the crop in the shoe industry ping patterns in the back half of the year. and deserves a handsome premium as a Cal- QUARTERLY DIVIDENDS PAID C Full endar Mar 31 Jun 30 Sep.30 Dec.31 If so, annual sales should eclipse the $40 result. Still,_the lofty price tag sits well Year billion mark for the first time in company within our Target Price Range three to 2016 .16 .16 .16 .16 2017 64 history. Healthy sales gains at the Jordan five years hence. This leaves very little .18 .18 .18 18 2018 .20 2 brand will get a good bit of the credit as- long-term appreciation potential for new 20 20 .20 2019 22 .22 22 .22 .88 suming such an accomplishment occurs. accounts. 2020 245 245 245 .245 The belief that NIKE was losing its Erik M. Manning October 23. 2020 (A) Fiscal years and May 31st. (B) Diluted change in share count. Next egs. report due available. (D) Includes 21 dividend paid De- Company's Financial Strength A++ earnings. Excludes nonrecurring: 07, 20; "08, mid-December cember 2012. (E) In millions, adjusted for Stock's Price Stability 75 8c; '09 (130); '13, 10; '18, ($1.23) due to tax (C) Dividends historically paid in early January, splits. (F) Each share of Class A is convertible Price Growth Persistence 85 law change; '20, (250). May not sum due to April, July, and October. Reinvestment plan to one share of Class B. Earnings Predictability 85 , . and is THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber's own, non-commercial, intemal use. No part to subscribe call 1-800-VALUELINE of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product. Year What is the FCFE terminal value in year 2025 if the long term growth rate in FCFE is assumed to be 3%? $230,453 million $243,569 million O $152.472 million O $329,564 million Question 27 What is the present value of the FCFE terminal value? $230,596 million O $242.542 million O $101.401 million O $326,854 million D Question 28 What is the equity value using the FCFE model? $119,075 million $422.203 million $326,456 million O $233,093 million Question 29 What is the value of NIKE's shares using the FCFE model if he company has 1,558 million shares outstanding? $22.64 O $110.32 $164.38 $76.43
