Validea Detailed Fundamental Analysis

Validea's guru fundamental report indicates NIKE INC (NKE) receives an 88% rating based on Partha Mohanram's P/B Growth Investor model, which favors low book-to-market stocks with sustained growth characteristics. The model, which has historically outperformed the market, positively assesses Nike's book/market ratio, return on assets, cash flow, and sales variance, but the company fails the model's research and development to assets test. Mohanram's research identifies criteria to distinguish successful growth stocks from underperformers using financial statement analysis.

Analysis

NIKE INC (NKE) has garnered an 88% rating according to Validea's P/B Growth Investor model, a strategy developed by Partha Mohanram designed to identify low book-to-market stocks with indicators of sustained future growth. This score signifies a notable alignment with the model's criteria, placing NKE in a category of interest for this specific growth-oriented strategy, which considers scores above 80% as indicative of interest and above 90% as strong interest. The company successfully passed crucial tests within this framework, including book/market ratio, return on assets, cash flow from operations to assets, consistency in cash flow versus return on assets, return on assets variance, sales variance, advertising to assets, and capital expenditures to assets. However, NKE failed to meet the model's criterion for research and development to assets. Mohanram's academic-backed model aims to distinguish successful growth stocks from potential underperformers by analyzing financial statements, and has a track record of market outperformance.

Key Decisions for Investors

• Investors employing growth-focused strategies should consider NKE for further due diligence, given its strong 88% rating from a recognized growth model and positive performance across multiple fundamental metrics highlighted.
• It is advisable to investigate NKE's research and development expenditure relative to its assets, as this was the sole criterion the company failed under this specific model, to assess any potential implications for long-term innovation and competitive advantage.
• The largely positive assessment from this growth-centric model may encourage existing NKE shareholders to maintain their positions, while prospective investors could evaluate NKE as a potential addition, aligning with the model's emphasis on sustained growth characteristics.