Nike (NYSE: NKE) is a large cap company that operates within the textiles, apparel and luxury goods industry. Its market cap is $124 billion today, and the total one-year return is -3.2% for shareholders.

Nike stock is underperforming the market. It’s beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company using data from Bloomberg LP.

Our system looks at six key metrics…

Earnings-per-Share (EPS) Growth: Nike reported a recent EPS growth rate of 23.21%. That’s above the textiles, apparel and luxury goods industry average of 4.92%. That’s a great sign. Nike’s earnings growth is outpacing that of its competitors.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the textiles, apparel and luxury goods industry is 86.9. And Nike’s ratio comes in at 21.29. It’s trading at a better value than many of its competitors.

Debt-to-Equity: The debt-to-equity ratio for Nike stock is 27.52%. That’s below the textiles, apparel and luxury goods industry average of 37.93%. The company is less leveraged.

Free Cash Flow per Share Growth: Nike’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

Profit Margins: The profit margin of Nike comes in at 13.53% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Nike’s profit margin is above the textiles, apparel and luxury goods average of 8.17%. So that’s a positive indicator for investors.

Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Nike is 32.6%, and that’s above its industry average ROE of 20.18%.

Nike stock passes six of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Strong Buy.*

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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing.


*The views and opinions expressed in this piece are those of the author and do not necessarily reflect the official position of professional analysts.