Financial Analysis: NIKE (NYSE:NKE) & Adidas (OTCMKTS:ADDYY)

NIKE (NYSE:NKE) and Adidas (OTCMKTS:ADDYY) are both large-cap consumer discretionary companies, but which is the better business? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

64.3% of NIKE shares are held by institutional investors. 0.8% of NIKE shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares NIKE and Adidas”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NIKE	$46.44 billion	2.06	$3.22 billion	$1.95	33.25
Adidas	$25.63 billion	1.29	$826.72 million	$3.82	24.33

NIKE has higher revenue and earnings than Adidas. Adidas is trading at a lower price-to-earnings ratio than NIKE, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares NIKE and Adidas’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NIKE	6.23%	21.16%	7.74%
Adidas	5.00%	21.33%	6.20%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for NIKE and Adidas, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NIKE	1	6	26	3	2.86
Adidas	0	2	4	3	3.11

NIKE presently has a consensus target price of $82.24, indicating a potential upside of 26.85%. Given NIKE’s higher probable upside, equities research analysts clearly believe NIKE is more favorable than Adidas.

Risk and Volatility

NIKE has a beta of 1.29, meaning that its share price is 29% more volatile than the S&P 500. Comparatively, Adidas has a beta of 1.2, meaning that its share price is 20% more volatile than the S&P 500.

Dividends

NIKE pays an annual dividend of $1.64 per share and has a dividend yield of 2.5%. Adidas pays an annual dividend of $0.75 per share and has a dividend yield of 0.8%. NIKE pays out 84.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Adidas pays out 19.6% of its earnings in the form of a dividend. NIKE has increased its dividend for 22 consecutive years. NIKE is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

NIKE beats Adidas on 13 of the 17 factors compared between the two stocks.

About NIKE

NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services worldwide. The company provides athletic and casual footwear, apparel, and accessories under the Jumpman trademark; and casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks. It also sells a line of performance equipment and accessories comprising bags, sport balls, socks, eyewear, timepieces, digital devices, bats, gloves, protective equipment, and other equipment for sports activities under the NIKE brand; and various plastic products to other manufacturers. In addition, the company markets apparel with licensed college and professional team, and league logos, as well as sells sports apparel; and licenses unaffiliated parties to manufacture and sell apparel, digital devices, and applications and other equipment for sports activities under NIKE-owned trademarks. It sells its products to footwear stores; sporting goods stores; athletic specialty stores; department stores; skate, tennis, and golf shops; and other retail accounts through NIKE-owned retail stores, digital platforms, independent distributors, licensees, and sales representatives. NIKE, Inc. was founded in 1964 and is headquartered in Beaverton, Oregon.

About Adidas

adidas AG, together with its subsidiaries, designs, develops, produces, and markets athletic and sports lifestyle products in Europe, the Middle East, Africa, North America, Greater China, the Asia-Pacific, and Latin America. It offers footwear, apparel, and accessories and gear, such as bags and balls under the adidas brand; golf footwear and apparel under the adidas Golf brand; and outdoor footwear under the Five Ten brand. It sells its products through its own retail stores; mono-branded franchise stores and shop-in-shops; and wholesale and its e-commerce channels. The company was formerly known as adidas-Salomon AG and changed its name to adidas AG in June 2006. adidas AG was founded in 1920 and is headquartered in Herzogenaurach, Germany.