Nike (NYSE:NKE) set an ambitious goal recently that is not unlike Coca-Cola's plan to double its revenue by the year 2020. Promising the triumvirate of top line, bottom line, and cash flow growth, Nike has a $36 billion goal to hit by 2017. It will be a mixture of Nike brand growth, women's apparel, and a nice boost from iconic shoe brand Converse that will lead the charge of what amounts to more than 40% sales growth between fiscal 2013 (recently completed) and 2017. Coming off a stellar quarter and strong guidance, investors may be inclined to think this is a reasonable, achievable goal. Let's see what it means for investors today.

Inch by inch
Not only did Nike management make the claim that it could reach a whopping $36 billion in sales just four years from now, it laid out how it would accomplish the task.

The company's estimates for over the four year period are as follows. Keep in mind that these are incremental revenues.

  • Nike brand revenue up to $10 billion.
  • Converse brand revenue to $3 billion (it was $1.45 billion in recently ended fiscal year).
  • Direct-to-consumer revenue to $8 billion; think e-commerce and store growth.
  • Average annual EPS growth rate in the mid-teens, driven by Central Europe, emerging markets, and China.
  • Mid-20s annualized ROIC.
  • Annualized free cash flow growth in the low teens.

All in all, these are some incredible growth figures for a company that has been around as long as Nike, which holds a market cap of more than $65 billion.

So, what does 2017 look like when discounted to today?

On a trailing basis, Nike has a price-to-sale ratio of 2.44 times. If that ratio were to hold up through the next four years, $36 billion in sales would equate to a market cap of nearly $88 billion, or a share price above $95. That's a four-year return of roughly 23%, or 5.75% annualized, before taking into consideration dividends. It is not unreasonable, or unlikely, to think that the company will increase its payout from the current 1.2% yield.

Clearly, the market has baked in a good bit of the expectations laid out by Nike management. Furthermore, this assumes all else is equal -- including the P/S ratio.

If we look at bottom line earnings and P/E ratios, the story is a bit different. If the company grew earnings by an annualized average of 15%, fiscal 2017 EPS could be in the neighborhood of $5.18. Using a P/E of 20 times (current forward P/E is 20.92 times) gives a price of more than $103 per share, or a 7.4% annualized return, before dividends.

For reference, the company's stock is up more than 50% this year alone.

These are relatively elementary valuations, and don't take into account much more than what was mentioned in the statement, but it does show that Nike stock today, while expensive, still leaves room for more down the road -- especially if it handily achieves its $36 billion goal.