Nike (NYSE: NKE) has been an iconic footwear and clothing brand for decades. But in recent years, he has faced challenges growing his business. Under a new CEO, the company is in the midst of a turnaround, aiming to rebuild relationships with key partners and return to growth. However, it has not been an easy road by any means.
Recently, the company reported its latest earnings figures. At first glance, they didn’t look that bad and revenue was comparable to a year ago. However, when you look at the big picture and compare it to where Nike was five years ago, you start to see how disappointing its results really are.
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On March 31, Nike reported its quarterly results for the period ending February 28. Revenue of $11.3 billion was flat and didn’t look too bad compared to the previous year. However, five years ago, during the same period, its revenue was $10.4 billion, meaning that since then, its revenue has increased by approximately only 9%. That equates to a compound annual growth rate of just 1.7%.
That’s a negligible rate, and it would be difficult to consider Nike a growth stock with those types of results. While it experienced strong demand amid the pandemic and consumers had more disposable income, its growth story has deteriorated rapidly over the past five years, as evidenced in the chart below.
What may be even more concerning is Nike’s bottom line. Last quarter, its profits totaled $520 million, down 35% year over year. And five years ago, its net income exceeded $1.4 billion; it has decreased 64% since then.
For investors, it can be misleading to look at how Nike has fared over the past quarter. It does not take into account the bigger picture or general long-term trends. Although its top line appears to be stabilizing in its most recent results, it’s important to remember that Nike is also facing softer numbers from a year ago.
If you are looking to buy Nike stock, you will need to be very patient as recovery efforts can take a long time. While Nike is optimistic that it is on the right path, the long-term results tell a different story. This year, the stock is already down 31%, and while its valuation may look attractive to bargain hunters, it’s also a much riskier investment than in the past.