TO: Mark Parker, Nike, Inc., CEO
FROM: Kevin Tracy
DATE: May 5, 2014
SUBJECT: Comparative Financial Breakdown
This memo has been created to pinpoint Nike’s market position by using competitor, Under
Armour as a benchmark for comparison. Under Armour was picked for assessment because they
compete with Nike in: sports apparel, footwear, college athletic uniforms, and celebrity
endorsements. Both companies compete for a similar demographic and share of the sports
apparel market. Under Armour has similar products, marketing tactics, and speed of innovation
which made them a practical choice for comparison. Nike is currently in a stronger position than
Under Armour based on the analysis of these five financial indicators: Stock price, Revenue,
Price-Earnings Ratio, Net Income, and Earnings per Share.
Nike Inc.
Under Armour Inc.
70
90
80
60
70
50
60
50
Intra Day
40
30
20
40
Intra-Day
6 month
30
6 month
1 year
20
1 year
10
10
0
0
Stock
Price
P/E Ratio EPS ratio
Figure 1 (Yahoo! Finance, 2014).
Stock Price
P/E Ratio
EPS Ratio
Figure 2 (Yahoo! Finance, 2014).
Stock Price
Nike’s stock price per share is $72.25 which is substantially higher than Under Armour’s $47.72
per share. However, it is concerning that Nike’s stock price has decreased in the past six months
whereas Under Armour’s has continually increased all year. A company’s stock price is a
reflection of their success and Nike needs to strive towards steadily increasing its stock value.
Price Earnings Ratio
P/E ratio is the only category in which Under Armour is outperforming Nike. Under Armour
boasts a 62.14 P/E ratio while Nike’s is less than half at 24.67. Having a high Price Earnings
ratio is an indicator of profitability and attracts stockholders to confidently purchase more shares.
Earnings per Share Ratio
Nike has a commanding lead in the market with an impressive EPS ratio of 2.93 which is almost
triple of Under Armour’s 0.77 EPS ratio. Earnings per share ratio is an important variable in
determining what a stock’s value is worth and it is reassuring to see that Nike’s high EPS ratio is
reflective of its high stock price.
Revenue and Net Income
Nike’s Revenue
Under Armour’s Revenue
Nike’s Net Income
Under Armour’s Net Income
27.07B
2.50B
2.70B
167.89M
Table 1 (Yahoo! Finance, 2014).
Revenue and Net Income
As shown in Table 1, Nike has a considerable advantage in both net income and revenue. These
variables represent the bottom-line and it is evident that Nike is the more profitable company.
Comparative Review
After analyzing the stock prices, P/E ratio, Earnings per Share ratio, Revenue, and Net
income of both companies it is evident that Nike holds a commanding lead over Under Armour
in the sports apparel market. However, the only financial variable in which Nike does not
outperform Under Armour is its P/E ratio. On the other hand, P/E ratios can be deceiving
because they are volatile and subject to change quickly. In the end, Nike currently holds a very
strong position in the sports apparel market relative to Under Armour and a shift in the market
share is highly unlikely at this point in time.
References
Yahoo! Finance. (2014, May 6). Nike Inc. Key Statistics. Retrieved May 6, 2014, from Yahoo! Finance:
http://finance.yahoo.com/q/ks?s=NKE+Key+Statistics
Yahoo! Finance. (2014, May 6). Under Armour Inc. Key Statistics. Retrieved May 6, 2014, from Yahoo!
Finance: http://finance.yahoo.com/q/ks?s=UA+Key+Statistics