Nike, Inc. (NYSE:NKE) released its quarterly results on Thursday. The results were a bit mixed as although the company beat sales expectations with its top line up 4% year over year, Nike fell short of the earnings numbers that analysts were expecting by four cents.
Net income was down 13% from the prior year but a big reason for the decline was a result of last year the company enjoying a much smaller tax rate which distorted the overall results. Pre-tax profits in Q4 were up 2% from the prior year and for the full 12 months they rose by 11%.
The good news is that the company continued to see growth among key markets. In North America, sales were up 7% for both the quarter and the year. However, it was China that showed the strongest numbers, increasing 22% in Q4 and 24% for the full year (ignoring currency impact).
It’s a sign that the Nike brand is still growing in parts of the world and hasn’t fallen out of favour even amid greater competition.
But the question that investors need to ask themselves is whether the stock is worth its current valuation. Trading at more than 30 times its earnings and about 15 times its book value, investors are paying a hefty premium to own Nike’s stock today.
At those kind of multiples, I’d expect the stock to be showing double-digit growth.
Overall, investors weren’t too excited or disappointed with the results as the stock showed minimal change in after-hours trading. In the past 12 months, Nike’s stock has risen by more than 17%.
