Nike Inc. (NYSE:NKE)

The company's financial performance from May 31, 2019, through May 31, 2024, reveals several notable trends across key profitability and leverage metrics.

Return on Assets (ROA)

The ROA demonstrates significant fluctuation over the observed period. Initially, ROA stood at a high of 16.99% in 2019 but experienced a marked decline to 8.1% in 2020. Subsequently, there was a recovery phase with ROA increasing to 15.17% in 2021. This recovery, however, slightly tapered off but remained stable, close to 15%, in 2022. The following year saw a decrease to 13.51%, followed by a modest improvement to 14.96% in 2024. Overall, despite volatility, the ROA maintains a relatively strong position by the end of the period compared to the dip in 2020.

Financial Leverage

The financial leverage ratio experienced an upward spike in 2020, rising from 2.62 to 3.89, indicating an increased use of debt or financial obligations during that year. Thereafter, the leverage ratio declined steadily to around 2.64 by 2024, which aligns it back closer to the 2019 levels. This trend suggests a period of heightened financial risk in 2020 followed by a cautious reduction in leverage in subsequent years.

Return on Equity (ROE)

ROE followed a pattern somewhat similar to ROA, with high initial levels of 44.57% in 2019, dropping to a low of 31.52% in 2020. This was followed by a rebound to a peak of 44.86% in 2021. Despite a downward trend from 2021 through 2023, where ROE declined to 36.2%, the metric showed a recovery to 39.5% in 2024. This reflects an overall high level of equity returns even after the period of contraction experienced in 2020 and subsequent slight declines.

In summary, the company faced a challenging performance year in 2020, as reflected by reduced ROA and ROE and increased financial leverage. However, it showed resilience with recovering profitability measures in 2021 and a stabilization in leverage afterward. Although there was some erosion in profitability ratios from 2021 to 2023, the company appears to have regained some momentum by 2024, maintaining efficient asset utilization and equity returns with controlled leverage levels.

Net Profit Margin

The net profit margin fluctuated over the observed period. It declined significantly from 10.3% in 2019 to 6.79% in 2020, likely reflecting increased expenses or reduced profitability during that time. Subsequently, it recovered strongly to 12.86% in 2021 and remained relatively stable at 12.94% in 2022. However, it decreased again to 9.9% in 2023 before rising moderately to 11.1% in 2024. Overall, the margin shows volatility with a tendency to rebound after decreases.

Asset Turnover

Asset turnover exhibited a downward trend between 2019 and 2022, falling from 1.65 to 1.16. This suggests decreasing efficiency in using assets to generate revenue. In 2023, there was a notable improvement to 1.36, representing enhanced asset utilization, which was largely maintained in 2024 at 1.35. Despite the mid-period decline, the recent trend indicates efforts to improve operational efficiency.

Financial Leverage

Financial leverage surged in 2020 to 3.89 from 2.62 in 2019, indicating increased reliance on debt or other liabilities relative to equity. Following this peak, it declined steadily to around 2.64-2.68 from 2021 through 2024. The reduction suggests a strategic move towards reducing financial risk and reliance on debt financing after the 2020 increase.

Return on Equity (ROE)

ROE mirrored the net profit margin trend with a significant drop from 44.57% in 2019 to 31.52% in 2020. It then rebounded sharply to 44.86% in 2021 before declining gradually to 39.57% in 2022 and 36.2% in 2023. In 2024, ROE improved again to 39.5%. These fluctuations reflect changes in profitability and efficiency in equity utilization, affected also by shifts in financial leverage and asset turnover trends.

Tax Burden

The tax burden ratio exhibits some fluctuations across the periods analyzed. It increased from 0.84 in 2019 to a peak of 0.91 in 2022, indicating a relatively higher portion of pre-tax income retained after taxes during this period. This was followed by a decrease to 0.82 in 2023 and then a slight recovery to 0.85 in 2024. Overall, the tax burden shows variability but remains within a moderately high retention range.

Interest Burden

The interest burden ratio remains remarkably stable over the years, consistently around 0.95 to 0.97. This stability suggests that interest expenses remain a relatively constant proportion of earnings before interest and taxes (EBIT), indicating consistent management of debt costs relative to operating income.

EBIT Margin

The EBIT margin displays notable volatility. It experienced a significant decline from 12.61% in 2019 to a low of 8.12% in 2020. However, there was a strong recovery to 15.62% in 2021, followed by a slight decline in subsequent years, reaching 12.68% in 2023 but improving modestly to 13.57% in 2024. This pattern suggests fluctuations in operational profitability, impacted potentially by varying cost structures or revenue changes.

Asset Turnover

There is a downward trend in asset turnover from 1.65 in 2019 to around 1.16-1.18 during 2020 to 2022, indicating that the efficiency of asset use in generating revenue decreased initially. However, there is a recovery seen in 2023 and 2024 with ratios increasing to 1.36 and 1.35 respectively, signaling an improvement in asset utilization efficiency in the most recent periods.

Financial Leverage

The financial leverage ratio shows significant variation, with a sharp increase from 2.62 in 2019 to a peak of 3.89 in 2020. This suggests greater reliance on debt financing or increased asset base relative to equity in that year. The ratio then declines to levels around 2.6–2.7 for the subsequent years, reflecting a reduction or stabilization of leverage more in line with the pre-2020 level.

Return on Equity (ROE)

ROE follows a trajectory somewhat mirroring the underlying components of tax burden, interest burden, EBIT margin, asset turnover, and financial leverage. It drops significantly from 44.57% in 2019 to 31.52% in 2020, recovers sharply to 44.86% in 2021, then declines gradually to 36.2% in 2023, with a modest rebound to 39.5% in 2024. This indicates a period of temporary decline in overall profitability for shareholders, followed by partial recovery, consistent with fluctuations in operational efficiency and financial structure.

Net Profit Margin

The net profit margin exhibited notable fluctuations over the analyzed period. Initially, there was a decline from 10.3% in 2019 to 6.79% in 2020, indicating a decrease in profitability during that year. Subsequently, the margin recovered strongly in 2021 and 2022, reaching peak levels of 12.86% and 12.94%, respectively. However, a decline was observed in 2023 to 9.9%, followed by a moderate improvement to 11.1% in 2024. Overall, while the margin shows variability, the company managed to achieve higher profitability levels after 2020, with some volatility in the most recent years.

Asset Turnover

Asset turnover demonstrated a downward trend from 1.65 in 2019 to a lower level around 1.16-1.18 during 2020 to 2022, reflecting reduced efficiency in utilizing assets to generate revenue. Thereafter, the ratio improved significantly in the last two years, rising to 1.36 in 2023 and stabilizing at 1.35 in 2024. This pattern suggests an initial decline in asset utilization followed by a recovery phase, indicating better operational performance or asset management in the latest periods.

Return on Assets (ROA)

The return on assets mirrored some of the trends seen in profitability and turnover metrics. ROA declined from 16.99% in 2019 to a low of 8.1% in 2020, showing a considerable dip in overall asset profitability. Following this, the ROA improved substantially to 15.17% in 2021 and remained relatively stable in 2022 at 14.99%. A slight decrease occurred in 2023 to 13.51%, but ROA rose again to 14.96% in 2024. The overall trajectory implies a recovery after a sharp decline, with the company maintaining a strong ability to generate earnings from its assets through most of the recent years.

Tax Burden

The tax burden ratio generally demonstrates variability over the periods, ranging from a low of 0.82 in 2023 to a high of 0.91 in 2022. After an increase from 0.84 in 2019 to 0.91 in 2022, it declined in 2023 but rose again slightly in 2024. This reflects fluctuations in the effective tax rate impacting net income.

Interest Burden

This ratio remained relatively stable throughout the observed periods, consistently close to 0.96. Minor variations from 0.95 to 0.97 suggest limited volatility in interest expenses relative to earnings before interest and taxes (EBIT), indicating consistent interest cost management.

EBIT Margin

The EBIT margin exhibited notable fluctuations, declining sharply from 12.61% in 2019 to 8.12% in 2020, possibly due to external pressures or increased costs. It then recovered strongly to 15.62% in 2021, followed by a slight decrease to 12.68% in 2023 before a modest increase to 13.57% in 2024. This pattern suggests periods of margin pressure and recovery.

Asset Turnover

The asset turnover ratio showed a declining trend from 1.65 in 2019 to around 1.16-1.18 in 2021 and 2022, indicating reduced efficiency in generating sales from assets. However, it improved to 1.36 in 2023 and held steady at 1.35 in 2024, signaling a recovery in asset utilization.

Return on Assets (ROA)

ROA mirrored the patterns of profitability and asset utilization, with a decline from 16.99% in 2019 to 8.1% in 2020, followed by recovery to 15.17% in 2021. Subsequent years showed moderate decreases and increases, settling near 15% in 2024. The ROA trend reflects the combined effects of varying EBIT margins, asset turnover efficiency, and tax/interest burdens.

Tax Burden Ratio

The tax burden ratio exhibited fluctuations across the periods analyzed. It initially increased from 0.84 in 2019 to a peak of 0.91 in 2022, indicating a higher proportion of pre-tax income retained after taxes in that year. However, it subsequently declined to 0.82 in 2023 before rising slightly again to 0.85 in 2024. Overall, this ratio demonstrates some volatility but generally remains within a range suggesting moderate tax impact on earnings.

Interest Burden Ratio

The interest burden ratio remained relatively stable throughout the entire period, hovering just below 1.0. The values ranged narrowly between 0.95 and 0.97, indicating that interest expenses had a consistent and modest impact on earnings before taxes. This stability suggests effective management of interest costs or stable debt levels over time.

EBIT Margin

The EBIT margin showed considerable variability, starting at 12.61% in 2019 and dropping to a low of 8.12% in 2020. This decline could reflect operational challenges or increased costs during that period. However, there was a strong rebound in 2021 to 15.62%, followed by a slight dip to 14.88% in 2022. Margins then decreased to 12.68% in 2023 before a modest recovery to 13.57% in 2024. These movements suggest periods of both operational strength and some pressure on operating profitability.

Net Profit Margin

The net profit margin mirrored the pattern observed in EBIT margin with significant fluctuations. Starting at 10.3% in 2019, it dropped sharply to 6.79% in 2020, reflecting either increased expenses or reduced revenue efficiency. Thereafter, it rose substantially to 12.86% in 2021 and slightly increased to 12.94% in 2022, indicating strong bottom-line performance. The margin decreased again to 9.9% in 2023 before recovering to 11.1% in 2024. These trends highlight variable net profitability with some vulnerability to external or internal factors affecting costs or revenues.