Nike Executive Summary

Is Nike Worth the Buy? Thomas Senyard Issue It has been a week since Nikes analyst meeting in which management unveiled a scheme to revitalize the company. Kimi Ford wonders, is Nike a favorable buy for her mutual neckcloth? Background Nikes recent market sh atomic number 18 has been declining. The new schema that management introduced plans to develop a better mid-priced shoe, to push their apparel eviscerate and to put more effort into expense control. Lehman Brothers say that Nike is a virile buy, but UBS Warburg and CSFB analysts recommend not buying right now.Analysis There are several different methods that can be enforced to find the WACC and use it to decide whether a stock will be a good buy or not. The Earnings Capitalization Model is not clutch in this case because it does not work well for growing companies, as Nike is trying to do, and the Dividend Discount Model has several subjective inputs making it low-level to the CAPM method of determining WACC. Using this method Nikes WACC is found to be 9. 8%.Using this Nike is found to have very good returns on capital, with a reasonable amount of debt, at not too high of a cost. This WACC figure is higher than the one that Ford used, but it still shows us that the stock is undervalued, but by only about $15. This leads to a recommendation that Fords mutual fund should add Nike to its portfolio, and from the financial and debt ratios calculated, we get information that says Nike should continue to grow to higher stock prices after attain the price it was valued at today.