Nike Inc. (NYSE:NKE)

Net Operating Profit After Taxes (NOPAT)

The NOPAT decreased sharply from 4,182 million US$ in 2019 to 2,477 million US$ in 2020. Following this decline, there was a strong recovery with values rising to 5,490 million US$ in 2021 and maintaining similar levels through 2022 (5,557 million US$). However, a gradual decline is observed thereafter, with NOPAT reducing to 5,013 million US$ in 2023 and slightly improving to 5,146 million US$ in 2024.

Cost of Capital

The cost of capital showed a relatively stable trend, starting at 14.49% in 2019 and slightly decreasing over the years to 13.94% in 2024. Minor fluctuations occurred within the range of approximately 14.00% to 14.49% throughout the period, indicating a generally consistent capital cost environment.

Invested Capital

Invested capital increased significantly from 14,182 million US$ in 2019 to a peak of 21,137 million US$ in 2022. After this peak, there was a slight decrease to 20,394 million US$ in 2023, followed by a rise again to 22,129 million US$ in 2024. Overall, the trend points to a sustained expansion in invested capital over the examined period.

Economic Profit

Economic profit exhibited notable volatility, starting positively at 2,127 million US$ in 2019 but falling into negative territory at -194 million US$ in 2020. Recovery followed, with economic profit increasing to 2,456 million US$ in 2021 and maintaining a similar level in 2022 (2,544 million US$). Afterward, economic profit declined gradually to 2,101 million US$ in 2023 and continued a modest decrease to 2,062 million US$ in 2024.

Summary

The financial data presents a period of initial contraction in 2020, likely linked to external disruptions, followed by a robust recovery in profitability by 2021. Despite consistent invested capital growth and a stable cost of capital environment, economic profit and NOPAT reveal some volatility, with signs of recent marginal declines after peak recovery years. The patterns suggest cautious monitoring of profitability trends relative to the expanding invested capital base, as well as the impacts of cost of capital dynamics on value creation.

The financial data reveals several notable trends in profitability over the reported periods.

Net Income

The net income experienced a significant decline from 2019 to 2020, dropping from 4,029 million USD to 2,539 million USD. This reduction aligns with the global economic downturn during this period. However, there was a strong recovery in 2021, with net income more than doubling to 5,727 million USD. The subsequent two years saw fluctuations, with a decrease to 5,070 million USD in 2023, followed by an increase to 5,700 million USD in 2024, indicating a degree of volatility but overall recovery compared to the early years.

Net Operating Profit After Taxes (NOPAT)

The NOPAT data mirrors the net income trend closely, starting at 4,182 million USD in 2019 and declining substantially in 2020 to 2,477 million USD. A pronounced rebound occurred in 2021, rising to 5,490 million USD, followed by a slight increase to 5,557 million USD in 2022. In 2023, there was a dip to 5,013 million USD, but a moderate recovery was observed in 2024, reaching 5,146 million USD. This trajectory suggests the company managed to stabilize and improve its operational efficiency after the initial downturn.

Overall, both net income and NOPAT demonstrate resilience after the sharp decline in 2020. The data indicates recovery and stabilization in the subsequent years, though with some variability. The slight declines noted in 2023 for both metrics suggest external or operational challenges during that period, but the partial recovery in 2024 points to ongoing efforts to sustain profitability.

Income Tax Expense

The income tax expense displayed considerable fluctuations over the observed periods. Initially, it declined from 772 million US dollars in May 2019 to 348 million in May 2020, indicating a significant reduction in tax liability or taxable income during this timeframe. This was followed by a sharp increase in May 2021 to 934 million US dollars. After a moderate decrease to 605 million in May 2022, the expense rose again substantially, reaching 1,131 million US dollars in May 2023 before declining slightly to 1,000 million in May 2024. Overall, the trend reflects volatility with an upward bias particularly in the last three recorded years.

Cash Operating Taxes

Cash operating taxes show a consistent upward trend across the years. Starting from 770 million US dollars in May 2019, there was a moderate increase to 764 million in May 2020, which was followed by a significant surge to 1,390 million in May 2021. This upward momentum continued, albeit at a slower pace, rising to 1,313 million in May 2022 and 1,264 million in May 2023. The latest data point from May 2024 indicates a further increase to 1,482 million US dollars. The steady growth indicates rising cash tax payments associated with operations, possibly reflecting improved profitability or changes in tax payment timings.

Comparative Insights

While both income tax expense and cash operating taxes exhibit notable changes, cash operating taxes follow a more consistent and upward pattern. Income tax expense is more volatile, with periods of both sharp decreases and increases, which may reflect accounting adjustments, tax planning strategies, or variable taxable income. The divergence between the relatively smoother increase in cash operating taxes and the fluctuating income tax expense suggests a timing or recognition difference between tax expenses recognized in accounting records and actual tax payments.

The financial data presents several key trends regarding the company's debt, equity, and invested capital over a six-year period from May 2019 to May 2024.

Total Reported Debt & Leases

The total reported debt and leases show a significant increase from 2019 to 2020, nearly doubling from approximately $6.7 billion to $13 billion. After this sharp rise, the debt level slightly decreased but remained relatively stable in the following years, gradually declining to about $11.95 billion by May 2024. This pattern suggests an initial period of increased leverage followed by a gradual deleveraging or stabilization phase.

Shareholders’ Equity

Shareholders' equity experienced a declining trend from May 2019 through May 2020, decreasing from $9 billion to $8 billion. Subsequently, there was a marked recovery starting in 2021, with equity rising significantly to nearly $12.8 billion. This upward trajectory continued through 2022, reaching a peak of approximately $15.3 billion, before slightly declining to $14 billion in 2023 and then marginally increasing again to $14.4 billion by 2024. The overall pattern indicates a strong equity growth phase following an initial downturn, reflecting improved retained earnings or capital injections.

Invested Capital

Invested capital saw a substantial increase between 2019 and 2020, growing from roughly $14.2 billion to over $19 billion. The upward trend persisted, albeit with slower growth, reaching just above $21 billion in 2021 and stabilizing near this level through 2022. A slight dip occurred in 2023, followed by a recovery to approximately $22.1 billion in 2024. This suggests continued investment in the company's assets or operations, tempered by some variation in the most recent period.

In summary, the data reflects a period of heightened financial activity around 2020, with increased leverage and invested capital. Subsequent years show signs of financial stabilization and growth in shareholders' equity, indicating a strengthening of the company's financial position. The gradual reduction of debt alongside rising equity and stable invested capital suggests improved balance sheet management and potentially enhanced financial resilience.

Economic Profit Analysis

The economic profit experienced significant fluctuations over the six-year period. It started at 2,127 million US dollars in 2019, dropped sharply to a negative value of -194 million in 2020, which indicates a loss in economic profit for that year. Following this decline, there was a strong recovery with positive economic profit values observed from 2021 through 2024, peaking at 2,544 million in 2022. However, after 2022, economic profit showed a gradual downward trend, decreasing to 2,101 million in 2023 and further to 2,062 million in 2024.

Invested Capital Trends

Invested capital demonstrated an overall increasing trend during the period, beginning at 14,182 million US dollars in 2019 and rising steadily to 22,129 million in 2024. The most substantial increase was observed between 2019 and 2020, where invested capital jumped by nearly 5,000 million. From 2020 onward, invested capital continued to grow but at a slower pace, with minor fluctuations in the later years including a small decrease in 2023 before increasing again in 2024.

Economic Spread Ratio Patterns

The economic spread ratio mirrored the trends in economic profit, showing a positive value of 15% in 2019, followed by a decline to a negative ratio of -1.02% in 2020, indicating a loss of value creation relative to invested capital. Subsequently, the ratio recovered to above 10% in the years 2021 through 2024 but showed a gradual decline from 12.03% in 2022 to 9.32% in 2024. This decline suggests a decreasing efficiency in generating economic profit relative to the amount of invested capital in recent years.

Overall Observations

The data reflects a period of volatility in economic profitability with a significant setback in 2020 presumably impacting operational or market conditions. Despite the downturn, there was a robust recovery through 2021 and 2022, although economic profit and efficiency ratios have shown downward pressure in the final two years. The consistent growth in invested capital suggests ongoing investment in assets, though diminishing returns on these investments may be emerging, as suggested by the decreasing economic spread ratio in the later periods.

Revenue Trends

Revenues demonstrated a generally upward trend from May 31, 2019, to May 31, 2024. Starting at $39,117 million in 2019, revenues slightly decreased to $37,403 million in 2020. Following this decline, revenues increased steadily each year, reaching $51,362 million by 2024. This suggests a recovery and subsequent growth in sales following the dip observed in 2020.

Economic Profit Trends

Economic profit showed significant fluctuations across the analyzed periods. The profit was $2,127 million in 2019 but turned negative to -$194 million in 2020, indicating a loss in that year. Economic profit rebounded sharply in 2021 to $2,456 million and remained relatively stable through 2024, with minor decreases to $2,062 million in the final year. These variations reflect volatility likely influenced by external factors during 2020, followed by strong recovery and consistent profitability afterward.

Economic Profit Margin Trends

The economic profit margin mirrored the trend in economic profit, with a positive margin of 5.44% in 2019 dropping to -0.52% in 2020, indicating the company experienced a loss relative to revenues during that year. Margins recovered to above 5.4% in 2021 and 2022 but declined to 4.1% in 2023 and slightly decreased further to 4.01% in 2024. This downward margin trend in the most recent years suggests that while profitability remains positive, efficiency or profitability relative to revenue may be slightly weakening.

Overall Insights

The data reveals a clear impact in 2020 with a decline in revenues, an economic loss, and negative profit margins, likely due to extraordinary circumstances during that period. The subsequent years show recovery and growth in revenues accompanied by regained profitability, although the economic profit margin shows some contraction recently. Continuous monitoring is advisable to understand the causes behind the declining margin and to sustain profitability alongside revenue growth.