Last update on 2024-06-04

Nike (NKE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore Nike's Piotroski F-Score analysis for 2023. Evaluate NKE's financial health and investment potential with a comprehensive look at profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 6

We're running Nike (NKE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Nike (NKE) underwent the Piotroski F-Score analysis, scoring 6 out of 9, indicating a moderately strong financial position. Key points include a positive net income, strong operating cash flow, increasing current ratio, a reduction in shares outstanding, and an improving asset turnover ratio. However, concerns include a declining ROA, slight increase in leverage, and a decrease in gross margin, hinting at some operational inefficiencies or competitive pressures.

Insights for Value Investors Seeking Stable Income

Nike (NKE) shows a robust financial position with its positive net income, impressive cash flows, and prudent share buybacks. Nevertheless, the declining ROA and gross margin might be areas of concern. If you are looking for a stable investment with moderate growth potential, it’s worth considering Nike. However, keep an eye on its operational efficiency and leverage for future performance indicators.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Nike (NKE)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability and overall financial health. Consistently positive net income suggests a robust business model and operational efficiency.

For the fiscal year 2023, Nike (NKE) reported a net income of $5,070,000,000. This is indeed a positive figure and, therefore, according to Piotroski criterion, adds 1 point. Analyzing the historical net income data over the last 20 years reveals that Nike has shown a consistent upward trajectory in profitability, with only a few fluctuations. The positive net income for 2023 continues this trend of strong financial performance, underscoring Nike's resilience and market position. Even though the 2023 figure is slightly lower than the previous year's $6,046,000,000, it still indicates solid profitability. Hence, this is favorable for Nike's financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the cash inflow and outflow from a company's core business operations. It's crucial to be positive as it shows the company can generate sufficient cash.

For the fiscal year 2023, Nike reported a positive Cash Flow from Operations (CFO) of $5,841,000,000. This indicates a healthy inflow of cash from Nike's fundamental operating activities, reinforcing its capability to meet operational expenses, invest, and provide dividends without needing external financing. Historically, Nike has consistently shown positive CFO figures, demonstrating solid operational performance. Therefore, for 2023, Nike earns 1 point for this Piotroski criterion, affirming robust financial health.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets, indicating how efficiently management is using its assets to generate earnings. Higher ROA suggests better asset utilization and profitability.

In 2023, Nike reported a ROA of 0.1302, a decrease from 0.1549 in 2022. This results in 0 points for this Piotroski criterion. The significant drop suggests less efficient asset utilization and could be a concern for investors. Industry median ROA has remained relatively stable, further indicating that Nike's decline might be due to internal factors rather than industry-wide trends.

Operating Cashflow are higher than Netincome?

Operating cash flow should be higher than net income annually.

For Nike (NKE) in 2023, the operating cash flow stands at $5.841 billion, exceeding the net income of $5.07 billion. This trend is positive, adding 1 point to Nike's Piotroski score. Higher operating cash flow compared to net income often indicates robust earnings quality and effective cash generation from core operations. Historically, Nike has had stable or increasing operating cash flow with notable peaks in 2019 and 2021 reaching $5.90 billion and $6.657 billion respectively. This consistency bolsters investor confidence in Nike's operational strength, even more so in years where net income slightly declines.

Liquidity of Nike (NKE)

Leverage is declining?

Change in Leverage evaluates the shift in the company's debt level relative to its earnings. A lower leverage indicates diminishing debt and potentially stronger financial health.

A comparison of Nike's leverage ratio shows a marginal increase from 0.2901 in 2022 to 0.3121 in 2023. This increment in leverage, however, leads us to conclude that Nike's debt relative to earnings has increased. Given this trend, Nike does not earn a point for this criterion. Utilizing historical leverage data, we can observe that leverage had significant jumps especially from 2014, yet still rests within a reasonable range as exemplified in prior years, notably 2018 with a ratio of 0.1539.

Current Ratio is growing?

Current Ratio examines a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates better short-term financial health.

The Current Ratio of Nike increased from 2.6294 in 2022 to 2.7228 in 2023, signaling a positive trend for short-term financial health. With this increase, Nike scores 1 point on this criterion. Additionally, over the last 20 years, Nike's Current Ratio has generally been above the industry median, which indicates stronger liquidity compared to its peers. For instance, the industry median Current Ratio in 2023 is 1.9271, considerably lower than Nike's ratio, hinting at better short-term solvency.

Number of shares not diluted?

A decrease in the number of shares outstanding can indicate a share buyback, which can be beneficial by increasing EPS and showing management's confidence in the company.

Upon examining Nike's outstanding shares, we can observe a decrease from 1,578,800,000 shares in 2022 to 1,551,600,000 shares in 2023. This reduction suggests that Nike has possibly engaged in share buybacks, which is a positive trend as it often implies that management believes the shares are undervalued. Historically, Nike's outstanding shares have been fluctuating but showing a general downward trend, particularly from 2009 where outstanding shares were at 1,962,800,000 to the current 1,551,600,000 in 2023. This continued decline in outstanding shares earns Nike 1 point in the Piotroski analysis for this criterion, indicating a positive outlook and value creation for existing shareholders.

Operating of Nike (NKE)

Cross Margin is growing?

Change in Gross Margin is an essential metric because it showcases a company's operational efficiency and pricing strategies. Gross Margin fluctuates due to various factors such as production costs and pricing power, directly impacting profitability.

In 2023, Nike reported a Gross Margin of 0.4352, compared to 0.4598 in 2022. This is a decrease, not an increase in Gross Margin, hence no point is awarded for this criterion. This is not favorable as a declining gross margin implies lower efficiency or increased costs. The historical data further indicates that Nike's Gross Margin in 2023 lags behind the 20-year peak of around 0.4628 in 2010 and the recent industry median of 0.4422. It is vital to identify factors contributing to this decline, such as rising production costs or competitive pressures, to gauge future performance.

Asset Turnover Ratio is growing?

The change in asset turnover ratio is crucial for evaluating a company's efficiency in using its assets to generate sales.

For Nike (NKE), the asset turnover has increased from 1.1968 in 2022 to 1.3158 in 2023. This indicates improved efficiency in asset usage to generate revenue, adding 1 point to the score. Historically, Nike's asset turnover ratio has faced fluctuations, peaking at 1.6914 in 2019. The increase in 2023 suggests a positive trend post-pandemic recovery.