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3 Reasons Nike Inc. Stock Still Has Room To Run

Source: Nike

How Nike has been dominating

• Nike already has more than 50% of U.S. athletic apparel market share

• Even as the market leader, Nike still grew revenue 10% in 2014 to nearly $28 billion.

• Due to strong margins, earnings per share also grew 11% in 2014

Which explains why Nike stock is not cheapIn the last two years, the share price has climbed almost 70%

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And more reasons Nike shares could go higher still

Source: Nike

1: Expanding Gross MarginWhile a 2.5 percentage point increase since January 2013 may not seem all that impressive, that equates to about $700 million in added gross profit.

2: Growing market shareEven the upstart, Under Armour, is unable to keep up -- Nike is still growing its market share faster.

3: More international opportunity International sales make up about half of total Nike revenue•International revenue was up 8.5% for 2014•Future orders are up in almost every international regionAll of this while dealing with a much stronger dollar•International sales are actually depressed due to unfavorable currency headwinds•If the U.S. dollar stabilizes against other currencies around the world (especially China), then international sales will look even better•Most recent quarter would have seen an additional six percentage point increase in revenue without currency effects

Final play: Nike premium is fair

Trading at 30 times expected 2015 earnings, Nike does not look very cheap. But it is not far ahead of the industry average of 23 times earnings, and a premium is not unexpected given its dominant position in the space.

Factoring in expanding margins/market share and major opportunities abroad, Nike lives up to its self-titled status as a growth stock.

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