NIKE, Inc. (NKE), Under Armour Inc (UA): This Stock Should Help Your Portfolio Run

But the more dangerous competition comes from adidas AG (ETR:ADS), which is behind Nike, but is looking to make a dent in its market share. adidas AG (ETR:ADS) has been constantly innovating to improve its shoes and it is of the opinion that its latest running shoes should help it chase Nike. The new running shoes from adidas AG (ETR:ADS) provide spring to the runner’s steps with constant energy and bounce and sell for $150. The company believes that this is a fresh innovation in running shoes and Nike should watch out.

Also, adidas AG (ETR:ADS) has a strong presence in international markets from where it derives around 60% of revenue. This is a threat for Nike, since Adidas is a Germany-based company but has spread its wings to markets across the globe, plus it has brand recognition as well. Adidas is looking to open around 100 new stores in 2013 and might open even more if it gets the right locations. Hence, its brand strength and store expansion are reasons why Nike needs to keep a watch on adidas AG (ETR:ADS).

Final words

Nike’s current price to earnings ratio is 23.47 compared with the 20.65 industry average and 16.65 for the S&P 500. At the same time, the P/E’s for competitors like Adidas is 33.06 and Puma Vct VII PLC (LON:PUMA) is 70.54. The stock is trading at a premium to the industry average based on forward earnings estimates for fiscal 2014 and 2015, but this is probably because of Nike’s brand strength and its great record.

With consistent results and a promising future, it seems that the company will increase investors’ confidence and enhance its market share. Continuous growth in its top line and bottom line should drive the stock price as well. Its earnings growth and aggressive expansion plans in emerging markets will definitely fetch good returns for investors over the long haul.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. ANUP is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Stock Should Help Your Portfolio Run originally appeared on Fool.com is written by ANUP SINGH.

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