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Nike's Still a Great Company, Still Growing

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If you're a Nike (NYSE: NKE  ) investor or are considering becoming one, you've probably already read the "highlights" of the company's fiscal third-quarter results. You know that Nike's earnings per share missed analysts' estimates, it was hurt by rising commodity costs, and the stock was down significantly in after-hours trading.

That all sounds pretty bad, right?

And it is very bad news if you placed a bet on whether Nike would beat earnings estimates this quarter -- because if you did, you lost. However, if you're like most Foolish investors, you're investing in companies for the long term, not making wagers on a single quarter's earnings.

The silver lining
If we go past the headlines, things aren't as bad as they seem. Sure, Nike did take a hit from rising costs, but that shouldn't be too much of a surprise since we've already heard plenty about that issue, whether it's been from clothing companies like True Religion (Nasdaq: TRLG  ) or giant consumer companies like Procter & Gamble (NYSE: PG  ) . When it came to the selling and administrative costs that Nike can more easily control, growth lagged that of revenue, pulling profits in the right direction – up 5%.

Nike's total revenue grew 7% from last year and a look over the wide swath of Nike's geographic regions shows that demand for Nike brand merchandise remains strong. Future orders -- which represent footwear and apparel to be delivered between March and July -- were up 11% overall, with an 11% jump in North America, 19% growth in China, and a 21% increase in other emerging markets.

Considering what's going on in Japan, it's notable that that was Nike's weakest market before the disaster, so that could be one place where Nike will continue to see some softness. However, for the fourth quarter, Japan accounted for all of 4% of Nike's total revenue, so it shouldn't have much of an impact on the company.

Overall, was it an outstanding quarter? No. But Nike is still the same great company and its business continues to grow around the world. The commodity issue isn't ideal and will likely persist, but the value of having a brand like Nike is that you have more ability to pass on rising costs to your customers.

Buy now?
All that said though, I'm not crazy about Nike's stock right now. Trading at 19 times trailing 12 months earnings, I see Nike's future returns as relatively mediocre compared to other opportunities out there. Sure, it doesn't have a nosebleed valuation like Motley Fool Rule Breakers favorites Under Armour (NYSE: UA  ) or lululemon athletica (Nasdaq: LULU  ) , but it also doesn't have the growth expectations that either of those companies have.

So what do you do? Well, I say keep an eye on the stock, stay up to date with what's going on, and watch for a more attractive buy-in price. You can do all of that by adding Nike to your Foolish watchlist.

Lululemon and Under Armour are Motley Fool Rule Breakers recommendations. Nike is a Motley Fool Stock Advisor pick. Under Armour is a Motley Fool Hidden Gems selection. Procter & Gamble is a Motley Fool Income Investor pick. The Fool owns shares of Lululemon 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.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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