On a recent episode of Fool Live show The Rank, three of our experts ranked seven stocks in the fitness industry. In this clip, recorded on June 4, chief growth officer Anand Chokkavelu gives a quick rundown of what investors need to know about adidas (OTC:ADDYY), which our panel ranked sixth. 

Anand Chokkavelu: Adidas is over the counter through an ADR of ADDYY. It's the world's No. 2 sneaker company. It's the Pepsi to Nike's Coke. It's based in Germany, but it really is a global shoe company. North America has only its No. 3 market, believe it or not. Europe is No. 1 which makes sense. Greater China is No. 2. It's increasingly focused on direct-to-consumer, as many of these companies are. It's up to 31% in the last quarter and accounts for more than a third of its sales, so up 31% counting for more than a third of its sales. Looking to focus on the adidas brand, it's divesting its Reebok holdings pretty soon. It bought Reebok way back in 2006, I thought it was a lot more recently, but it was $3.8 billion back then. It's probably going to sell for a steep discount to that 2006 price as the Reebok brand has struggled and represents less than 10% of Adidas's sales, represented a lot more earlier in its tenure. Looking at the financials, it's a $71 billion market cap company, $24 billion in sales. Sales dropped 16% due to the pandemic 2020, but it had grown 8% in 2019, and it's expected to grow at a high teams rate this year in 2021. Pretty strong, 50% gross margin expecting 52% in 2021. For comparison, Nike is only at 43%, so that's pretty good. Solid profitability, net income margin consistently in the low to mid single digits, solid balance sheet, it's got more cash than debt if you exclude leases. If you include leases, it's a lot more debt than cash, very strong interest coverage regardless, and the valuation's at a premium due to its blue-chipiness, P/E ratio, if you're looking at that at around 60, price-to-free cash flow around 30.

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