One shabby stock that turned $10,000 into nearly $1 million

As a business that provides clothing and shoes for athletes to compete at the highest level, Nike (NKE -2.40%) It has certainly been a successful investment in the past.

Over the past 30 years, top footwear and apparel stock The initial investment of $10,000 has now amounted to a whopping $962,000 (as of February 14th). dividend. A similar investment is S&P500 Today it’s worth $189,000.

Let’s take a look at Nike’s history to understand what factors led to such impressive achievements. It’s best for prospective investors to look at things today with a fresh perspective.

Nike’s winning history

Without a doubt, Nike’s most important quality is its strong brand. The company was founded in his 1964, and it took decades for the brand to become as strong as it is today. There is no doubt that this is a Nike characteristic. economic moatcan help you stand out against the competition.

In the mid-1980s, the company signed NBA superstar Michael Jordan, the most high-profile player of the time. This led to the launch of his Air Jordan line, which continues to release highly successful products to this day. This has allowed Nike to become a globally recognized athlete, increasing brand awareness and appealing to people around the world.

Additionally, this was the beginning of Nike developing core competencies in its marketing efforts. These days, the company is known for highly impactful advertising campaigns that not only resonate with people but also exude a winning spirit. And now, Nike’s endorsement list includes many famous athletes.

Of course, what truly contributed to Nike’s stock price’s impressive performance over the past 30 years were its strong fundamentals. Nike has done a great job of growing revenue and profits over the years. Over the past 10 years alone, sales and net income have increased by 109% and 194%, respectively, compounded annually.

Thanks to the strength of the brand, Nike products maintain a premium position in the market.business has achieved great results gross profit In the most recent fiscal quarter (Q2 2024 ended November 30, 2023), it was 44.6%.

current situation

Despite its huge historical success, Nike has had a bit of a tough time. Sales are expected to increase by only 1% this fiscal year. Management blamed the difficult macroeconomic environment, which has weighed on consumer demand. Increased uncertainty and continued inflation concerns may deter shoppers from spending money on discretionary items.

However, Nike has also faced intense competition recently, which is adding to the concerns. There are many direct-to-consumer brands that use social media as their primary marketing platform, which could undermine the position Nike has built with its customers.

In Greater China, typically the company’s fastest-growing region, Nike reported sales of about $1.9 billion in its latest quarter, down from three years ago. The business may be losing market share to competitors.

But to its credit, Nike’s gross margin actually expanded year over year. The company has been able to manage its inventory better, with inventory increasing by 43% in the same period last year. The current inventory balance is $8 billion, a decrease of 14% compared to the end of the second quarter of 2023. This shows that management’s top priority remains protecting the brand’s position, which is the right thing to do.

As we set our sights on the next 30 years, what are the chances that Nike will again generate returns in excess of 9,500% between now and the beginning of 2054?To be clear, I don’t think the stock price is going to outperform its past performance. I don’t think it will happen again. As a more mature company, Nike’s growth prospects will naturally decline as the company grows larger and penetrates further into key markets.

With the stock currently trading 40% below its peak price, some investors may want to consider adding the business to their portfolios now.