Few companies have been as successful at expanding in foreign markets as Nike (NYSE: NKE).

The company started out in 1964, when Phil Knight, a middle-distance runner from Oregon, and Bob Bowerman, a University of Oregon track and field coach, teamed up to distribute Tiger shoes from Japan in the U.S. Bowerman, who had tinkered with shoes to try to improve his athletes’ performance, soon began ripping apart the imported footwear to see how he could make it lighter—and faster.

From there, the pair moved into designing their own shoes, and the Nike brand, as well as the trademark swoosh, made their debut in 1972. The swoosh was created by Carolyn Davidson, a graphic design student at Portland State University who was paid $35 for her troubles (though she was later given 500 shares of the company).

“Well, I don’t love it, but maybe it will grow on me,” Knight reportedly said of her design.

The company has built its success on product innovation, creative marketing and partnerships with pro athletes to wear its products. Over the years, it has moved from shoes to apparel and equipment, expanding into a dizzying array of sports, including basketball, soccer, golf, skateboarding, snowboarding and tennis, along the way.

Now the company has the 26^th most powerful brand in the world, according to Interbrand. That’s been key to helping it expand overseas. North America now accounts for just 45.4% of Nike’s annual revenue, followed by Western Europe (18.0%), emerging markets (16.2%), China (10.7%), Central and Eastern Europe (5.6%) and Japan (3.5%).

Nike is currently the leading sportswear brand in the $23.8-billion Chinese market, with a 12.1% share. However, the industry is highly fragmented in China, and increasing competition there has forced Nike to keep a close eye on the rearview mirror: Adidas Sportswear now trails just behind, with 11.2%.

Year-Ago Earnings Miss Rattled Investors

A year ago last week, Nike reported earnings that missed analysts’ expectations by a wide margin: $1.17 a share versus the Street’s forecast of $1.37. As Investing Daily’s Jim Fink reported at the time, it was the end of an epic run: the sportswear giant had beaten the consensus forecast for 22 of the previous 23 quarters.

Investors jeered the performance, sending the stock down 9.4% on the news.

A year later, Nike is back in the lead: In the fourth quarter of its 2013 fiscal year, which ended May 31, 2013, the company’s revenue rose 7.4%, to $6.7 billion. Earnings per share jumped 28%, to $0.76. Both figures topped the Street’s forecast of $0.74 in profits on $6.64 billion of sales.

The stock, too, has made up the ground it lost a year ago and then some: on June 28, 2012, the day before the company reported its rare earnings miss, it closed at $48.44 a share. On Friday, it ended the session at $62.33, up 28.7% (per-share estimates adjusted for a 2-for-1 share split on December 26, 2012.).

Here are 4 reasons why last week’s earnings report is a world apart from the disappointment of a year ago:

• Improving margins: The company has been dealing with rising material costs for some time, but it said that this pressure is now starting to ease, helping widen its gross margin by 110 basis points, to 43.9%. A year ago, gross margin declined 150 basis points from the same quarter in 2011, to 42.9%. Earnings per share fell 6%, pulled down by the lower margin.
  
  “It’s always nice to see higher profit margins, as it means the company is running an efficient operation with low inventories, which allows products to be sold at full retail prices and eliminates the need for markdowns,” Fink wrote in a March 29, 2010, article on the stock.

• Inventories are rising in line with sales: The company’s stock of clothing, athletic shoes and other gear rose 7% in the latest quarter, roughly in line with the sales increase of 7.4%. Compare that to a year ago, when inventories shot up 23%, compared to a 14% sales increase.

• Higher futures orders: One figure that helps give an indication of the company’s prospects is “futures orders,” which allow retailers to order five to six months in advance of delivery with the commitment that their orders will be delivered within a set period at a fixed price. During the latest quarter, these orders rose 8%, to $12.1 billion. Futures orders for China rose 3%. These figures were up from 7% and 2%, respectively, a year ago.

• Cash reserves are growing: A debt issue earlier this year increased Nike’s long-term obligations from just $228 million a year ago to $1.21 billion today. However, the company ended the latest quarter with cash and short-term investments of $6.0 billion, up sharply from $3.8 billion a year ago, as a result of the offering and the sale of its Cole Haan and Umbro businesses. This move will let it focus on its core Nike, Jordan, Converse and Hurley brands. Its larger cash reserve also puts it in a good position to make acquisitions, buy back shares and develop new products.

High-Tech Equipment has Strong Potential

As Investing Daily contributor Greg Pugh pointed out in a June 2012 article, Nike continues to grow far beyond footwear and apparel. For example, its Nike+ products help its customers use the latest technology to track their fitness results.

“Nike is leading the transition of sports footwear and apparel connection to the digital world,” wrote Pugh. “Other Nike+ products include the FuelBand, which measures a person’s total physical activity and synchronizes it with a motivational web and mobile experience. The company also offers an iPhone app that uses the global positioning system to track distance, pace, time, and calories burned for runners, as well as shoes embedded with sensors that track how hard a person exercises.”

As Pugh also pointed out, the stock is not cheap: today it trades at 23.2 times the $2.69 a share it earned in fiscal 2013. However, the average analyst estimate calls for earnings per share (EPS) growth of over 12% for fiscal 2014. What’s more, it yields 1.3 percent, and Nike is a frequent buyer of its own stock: over the course of the past year, it has repurchased 33.5 million shares for a total of $1.7 billion. It has about $8.2 billion remaining on its current authorization.