Financial Pros Top Footwear Stock Remains Expensive

Nike (NKE) had this great idea - sell shoes directly to customers. [View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Footwear Stock Searches in the Last Month Rank Name Searches #1 Nike Inc 136 #2 Crocs Inc 58 #3 Deckers Outdoor Corp 21 #4 Footlocker Inc 13 #5 Sketchers 5 #ad [Crypto ATMs Are Popping Up Worldwide]( Brought to you by [Masterworks -Wellput]( [How these investors achieved a 100% positive net returns track record]( It may sound too good to be true, but this investment platform's users are already smiling all the way to the bank. All made possible by Masterworks, the award-winning platform for investing in blue-chip art. Every single one of Masterworks’ 14 sales has returned a profit to investors for a 100% positive net return track record. With 3 recent sales, Masterworks investors realized net annualized returns of 17.8%, 21.5% and 35%. How does it work? Simple: Masterworks does all of the heavy lifting like finding the painting, buying it, and storing it. It files each offering with the SEC so that nearly anyone can invest in highly coveted artworks for just a fraction of the price. You can skip the waitlist with this exclusive link. [Skip the waitlist]( See important Reg A disclosures at [masterworks.com/cd.]( Financial Pros Top Footwear Stock Remains Expensive Nike (NKE) had this great idea - sell shoes directly to customers. E-commerce helped other companies grow profitably. Yet, Nike couldn’t pull it off. While it’s direct revenues grew 18% last quarter, it came at the expense of its wholesale business through retailers like Foot Locker (FL). In the last two years, the company struggled with high inventory levels, despite record sales. While financial pros made this their #1 footwear stock search, they may have put the shoe on the wrong foot. Nike’s Business Famous for the Air Jordan shoe line, Nike sports and athletic wear and equipment exploded in the ‘90s, becoming one of the most popular brands in the U.S. and globally. The company breaks its business down into footwear, apparel, and equipment by geography: [business] [Source: Nike Website]( As the numbers above show, sales in China lagged the rest of the world, much as the country’s economy did. That’s partly due to Covid, but the company also took a hit because of its stance on Xinjiang cotton. While there are signs of improvement, it remains uncertain at best. American consumers have held strong, but worries over a possible recession remain. Financials [financials] Source: Stock Analysis Nike’s size and strong global brand help it consistently grow sales in the high single-digits most years. And overall, they’ve done a great job holding gross margins in place. However, operating margins fell over the last two years as inventory remained at a whopping $8.4 billion compared to prepandemic levels of around $5.6 billion. In fact, other than 2021, the company’s inventory has grown larger every single year for the past decade. Valuation [valuation] Source: Stock Analysis Compared to other footwear companies, Nike is one of the most expensive on a price-to-earnings and price-to-cash flow basis. Crocs (CROX), for example, is a third of the multiple on both metrics. Sketchers (SKX) also looks like a much more compelling valuation. Growth [growth] Source: Seeking Alpha Nike’s growth from revenue to EBITDA is also on the lower side compared to most of its peers. Interestingly, its customer Foot Locker (FL), isn’t doing well, partly because it’s no longer getting exclusive access to Nike shoes. Looking at this list, we’d still put CROX as one of the top stocks given its valuation and growth. Profitability [profitability] Source: Seeking Alpha Profit-wise, Nike still commands solid margins. But those have declined markedly and are no longer category-leading. And again, CROX looks to be the best of the bunch here. [Investing made easy with a daily quick read.]( Learn about the investing world’s best-kept secrets through insights from smart investors. Subscribe to The Juice newsletter for FREE to gain a clear understanding of the investment world to make informed money decisions. [Subscribe now.]( Our Opinion 3/10 Nike may be a well-known brand. But it’s struggles don’t appear to be ending anytime soon. Not only do they need to work off excess inventory, but they also need to reinvigorate sales in China, it’s highest margin region. While Nike typically trades at a premium, it’s simply too rich for its current performance and outlook. 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