Wednesday, May 5, 2010

Nike claims they're a growth company..... (NKE)


...So let's see.

Today, Nike (NKE) put out targets for revenue and Free Cash Flow through 2015.  They see revenue hitting $27billion by 2015, and cumulative free cash flow of $12billion.  Why they give a "cumulative" Free Cash Flow number, I don't know...maybe to give themselves wiggle room.

From their release:
NEW YORK--(BUSINESS WIRE)--Today NIKE, Inc. (NYSE:NKE -News) unveiled its strategy and key initiatives to achieve sustainable, long-term growth across its global portfolio of brands and businesses. During its investor meeting in New York, the Company announced a revenue target of $27 billion by the end of fiscal 2015 based on growth expectations across its portfolio, which includes the NIKE Brand, Cole Haan, Converse, Hurley, Jordan Brand, NIKE Golf and Umbro. Additionally, the Company believes it can generate over $12 billion of cumulative free cash flow from operations through 2015. Both goals extend NIKE, Inc.’s long-term financial model of high single-digit revenue growth, mid-teens earnings per share growth, and expanding returns on capital.*
As Nike has made a habit of under-promising, my Free Cash Flow estimates might be on the conservative side, so I make up for that with two difference Free Cash Flow Yield scenarios:


While I would give Nike the benefit of the doubt (as to outperforming their own benchmarks), these figures amount to about 10% total return annually over the next five years, a number that in my opinion will be right in line with the DJIA.

Copyright 2010 AlphaNinja

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