In this article I am going to analyze Nike company, based in its earning per share and its (P/E) ratio to see how much its stock will worth in the 2027.
First, let see how does Nike EPS did in the past six year starting form 2017 in order to estimate its growth rate, as shown below:
As we can see from the above chart that Nike maintain an uptrend EPS, which started from 2.31 EPS in 2017, until it re 3.54$ in 2022, that means Nike’s EPS was increasing in growth rate of 9.1%.
Now that we have the growth rate of Nike EPS in the last five years, we are going to use this growth rate to estimate what will its EPS be in 2027 ,which is five years from now by applying the following formula:
FV=PV(1+i)n
- Where
- PV = Nike EPS in year 2022 = 3.54 $
- i = growth rate of Nike EPS estimated above = 9.1%
- n = years of investment = 5 years in 2027
By substitute the numbers estimated early in the above formula, I end up with Nike’s EPS in year 2027 equal to 5.5$.
Now, I have to see what was (P/E) ratio that Nike did have in the last six years, which as shown below:
Now we can estimate two scenarios for Nike stock price which is Bull market and the bear market.
For Bull market , I am going to take the highest (P/E) ratio which was 74.58 in year 2020, to see what will be the price of Nike stock in 2027:
Bull market Nike Stock’s price in 2027= (74.58)*(5.5$) = 410.19$.
For Bear market, I will take the lowest (P/E) ratio which was 24.81 in year 2017, to see what will be the price of Nike stock in 2027.
Bear market Nike Stock’s price in 2027= (24.81)*(5.5$) = 136.5$.
As of writing this article, Nike stock price is 117.01$ which is below the bear market scenario by 16.7% which is a good margin of safety. Therefore, investing 10,000$ in Nike stock, will guarantee you a return of 11,665$ in 2027 if the stock market goes down, and 35,055.98$ if the stock market goes up.
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