Is Nike Inc Still a Growth Company?

There are many reasons to be bullish on the athletic wear space. Sales of athletic wear in the U.S. were up 9% from Q3 2013 to Q3 2014. Going forward, rising consumer confidence and jobs growth, which help nonessential consumer goods like middle to high-end sportswear, provide even more support for companies like Nike and Under Armour .

While Under Armour is a younger company that's been putting up impressive sales growth, the older Nike is no slouch. But with overwhelming brand awareness in the U.S. and a strong international presence, is Nike really still a "growth" company, and one that investors seeking growth stocks should consider playing?

Image: Nike

Under Armour might seem the classic "growth" company. It was founded in 1996, its first product a moisture-wicking T-shirt, and went public in 2005. Nike was founded in 1964 and has traded publicly since 1980, at which point it already had a 50% share of the U.S. athletic shoe market. Nike is now ranked No. 22 on Interbrand's list of best global brands.

Under Armour isn't as well-known as Nike, but being young, innovative, and cool to all the right audiences is what makes Under Armour the kind of company that growth-oriented investors are seeking for 30% or more sales growth quarter after quarter. In Q3 2014 Under Armour increased revenues 30% year over year, while income rose 22%. This followed revenue growth in the mid-30% range in Q1 and Q2, ahead of what was already strong growth in 2013 with full-year revenue up 27% over 2012.

Furthermore, Under Armour's management raised guidance for this year's Q4 to a 30% increase in revenue and a 31% increase in income. Compared to a company like this, can an older and already large company like Nike still be considered a growth company?

Nike believes that through developing innovative products, building deep personal connections, and creating compelling retail experiences, it can continue to be a "growth" company, driving higher sales year after year.

Nike did post huge growth during the most recent quarter, with revenue up 15% year over year. While that percentage is just half of UA's, consider that it still represents eight times as much actual revenue at $8 billion in sales for Nike. Furthermore, Nike's income rose 23% YOY, ahead Under Armour's number.

To be fair, part of the reason Nike has been able to report strong growth in the last few years is that it had major losses around 2009 following the global recession. But that was five years ago, and the company has been posting steady earnings growth for each year starting in 2010.

For the company to still be posting such solid earnings increases now shows that this company is still in a growth period. Not only are these earnings increases similar to or higher than those of Under Armour by both percentage and total income, investing in this growth is also much cheaper.

Under Armour is a true growth company, and looks to be a good long-term play. However, buying into the growth isn't cheap, with shares of UA trading at over 80 times earnings.

For investors looking for high growth in this space at a much lower price, Nike's P/E of 30 looks very attractive. Add this to a 34-year track record of being an innovative, market-leading company, with a much larger international presence, and a dividend where Under Armour has none, and Nike might be the better investment, even for investors looking for a growth play.

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Bradley Seth McNew owns shares of Apple. The Motley Fool recommends Apple, Nike, and Under Armour. The Motley Fool owns shares of Apple, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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