NIKE, Inc. (NKE): what the price requires
At today's price, NIKE, Inc. (NKE) is priced for +17.9% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/NKE
Headline
| Field | Value |
|---|---|
| Ticker | NKE |
| Company | NIKE, Inc. |
| Current price | $43.72/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 6.5% |
| Operating margin today | 7.3% |
| Margin compression implied | -0.8pp |
| Implied growth | 17.9% |
| Multiple paid | 20x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7pp.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | +2.29σ |
| cohort percentile (of 210 peers) | 57 |
| sustained it ~5 years at this level | 46% |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.24x | 4 | expensive |
| Earnings | 6.09x | 2 | expensive |
| Relative | 2.06x | 3 | expensive |
| Growth | 5.24x | 4 | expensive |
Families that call it expensive: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.
Per-Model Detail (n=13)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $4.98 | 8.78x | yes | FCF base $1.0B, growth -3% (input: historical growth), terminal g 0.5%, WACC 8.5%, 5yr projection |
| DCF Exit Multiple | Growth | $33.35 | 1.31x | yes | Exit EV/EBITDA: 90.0x / 92.0x / 94.0x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $21.22 | 2.06x | yes | P/E 21.24x (blended: static sector reference 18x + trailing (TTM) 29x), scenarios: 18.1x / 21.2x / 24.4x (bear / base = reference held flat / bull), EV/EBITDA 26.4x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | $2.46 | 17.77x | yes | Stage 1: -46% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $16.42 | 2.66x | yes | BV/sh $9.51, ROE (TTM) 16.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $21.30 | 2.05x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $25.60 | 1.71x | yes | Rev $46.5B, growth -3% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.4x / 1.6x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $21.66 | 2.02x | yes | BV $9.51 + 5yr PV of (ROE (TTM) 16.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $17.98 | 2.43x | yes | √(22.5 × EPS $1.51 × BVPS $9.51) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $3.05 | 14.33x | yes | EBITDA $0.75B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $4.60 | 9.50x | yes | FCF $1048.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $0.01 | 4371.50x | yes | SBC-adj FCF $0.33B (FCF $1.05B − SBC $0.72B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | $1.27 | 34.42x | yes | EPS $1.51 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $78.50 | 0.56x | yes | Revenue $46.52B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $16.32 | 2.68x | yes | EPS $1.51 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $28.0m |
| Net debt / NOPAT (after-tax) | -0.01x (net cash) |
| Net debt / operating income (pre-tax) | -0.01x (net cash) |
| Share count CAGR (buyback) | -2.1% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Nike's operating margin has fallen to about 7%, roughly half its historical level, which is the single fact that defines the stock: the price is a bet on whether that margin is a temporary trough in a turnaround or a new, lower normal.
- The biggest specific risk is China, where management expects revenue down about 20% in the fourth quarter as it clears inventory and resets the marketplace, on top of a tariff hit of roughly 250 basis points to North American gross margin.
- Watch the June 30 fiscal fourth-quarter report, which management has framed as the low point of its turnaround, with revenue expected down 2% to 4% and gross margin near the prior year.
Bull Case
The counterintuitive fact about Nike right now is that its worst number is the bull case. The company's operating margin has dropped to about 7%, roughly half the level it ran at for years. A 7% margin at Nike is not what a premier global brand earns when it is healthy; it is what one earns in the middle of clearing excess inventory, resetting wholesale relationships, and absorbing tariffs. The bull case is that this is a trough, not a ceiling. If the margin simply recovers toward what the brand has historically demonstrated, earnings rise sharply without a single extra dollar of revenue, because the operating leverage in a recovering margin is enormous.
The brand and the distribution machine that produce that margin are intact. Nike sells through two channels, its own direct operations of physical stores and digital platforms, and its wholesale accounts, a structure its filing lays out plainly. The turnaround under chief executive Elliott Hill is specifically about rebalancing those channels, restoring the wholesale partnerships that were pared back too far and clearing the inventory that forced discounting. Gross margin in a recent quarter sat at 43.6%, pressured by higher discounts and channel mix, exactly the kind of pressure that reverses as the inventory clears and full-price selling returns. The mechanism of recovery is visible in the same numbers that look weak today.
The balance sheet gives management the room to fix the business properly rather than in a hurry. Nike sits in a roughly net-cash position, with about $8 billion in liquid assets against its debt, and it has been buying back stock, shrinking the share count about 2% a year. A company that can self-fund a multi-year reset, return cash to holders while doing it, and still generate over $3 billion in trailing operating income even at a trough margin is not a turnaround at risk of failing for lack of resources. For a buyer at today's price, the bull case is straightforward: a dominant brand priced near a cyclical low in its own margin, with the operating leverage of a recovery still ahead of it.
Bear Case
The structural truth a Nike holder has to face is that the turnaround is taking longer than management hoped, and it is being run from what the company itself calls the low point. Chief executive Elliott Hill has framed the fourth quarter as the bottom of the reset and conceded the comeback is taking longer than expected. When the people running the recovery are still describing the present as the low point, the timeline to a restored margin is uncertain, and a stock priced for that recovery is exposed every quarter the recovery slips. The bull case rests on the margin being a trough; the bear case is that the company cannot yet say when the trough ends.
China is the hardest single problem. Management expects Greater China revenue down approximately 20% in the fourth quarter, reflecting reduced sell-in and accelerated actions to clean up the marketplace. China was once a high-margin growth engine; a 20% decline is the kind of move that reflects both Nike's own marketplace reset and intensifying local competition, and it is not clear how quickly that market recovers. Layered on top is a tariff hit of roughly 250 basis points to North American gross margin, a cost the company does not control and cannot fully pass through without further pressuring demand. The recovery has to overcome a shrinking China and a structural cost increase at the same time.
The valuation gives the bear its sharpest point. No family of valuation method reaches today's price: it reads rich on assets, on earnings power, on peer multiples, and even on forward growth, because every method anchors on the depressed current earnings. Reading the price backward, the market is paying about 19 times operating income and asking for roughly 16% annual operating-profit growth for five years, and only about half of comparable growers have sustained that pace. Competition is relentless; the filing names "intense competition among designers, marketers, distributors and sellers of athletic or leisure footwear, apparel and equipment for consumers and endorsers" as a core risk. The bear case is not that Nike is a bad business; it is that the price already assumes the full margin recovery, leaving no cushion if the turnaround that management calls slow turns out to be slower still.
Valuation
The price is a bet on a margin recovery, and saying so plainly clears away the confusion in the headline multiples. Reading today's level backward, the market pays about 19 times operating income and asks for roughly 16% annual operating-profit growth sustained for five years. That sounds aggressive for a mature apparel company, but it is really the arithmetic of recovery: with the operating margin at about 7%, half its historical level, returning toward a normal margin produces exactly that kind of operating-profit growth. The framework reads the embedded assumption as within range, and the near-term pace is consistent with what the company has delivered, but the multiple sits in the upper half of its peer group and only about half of comparable growers have sustained the implied pace.
The methods all sit below the price, and the reason is the same depressed earnings base. The asset-based, earnings-power, peer-multiple, and forward-growth methods each read the price as rich, because each one anchors on the current trough earnings rather than the recovered figure the price assumes. This is the classic shape of a turnaround stock: when no method reaches the price, the market is paying for a future the static numbers cannot yet see. The honest read is that the valuation is not stretched if you believe the margin recovers, and badly stretched if you do not. The whole question collapses to one variable, the margin, and the methods are simply telling you the price has already credited the recovery.
Solvency is not the concern; it is the safety net. Nike holds about $8 billion in liquid assets against its debt, sits roughly net-cash, and still generates over $3 billion in trailing operating income even at the trough margin, so it has ample resources to fund a multi-year reset and keep returning cash. A buyer at today's price is not underwriting financial risk; they are underwriting the timing and magnitude of the margin recovery. The decisive variable is whether the operating margin climbs back toward its historical level on a reasonable timeline.
Catalysts
The fiscal fourth-quarter report on June 30 is the immediate catalyst, and management has set expectations low. Revenue is expected down 2% to 4%, with modest growth in North America offset by declines in Greater China and Converse, and gross margin down roughly 25 to 75 basis points including a 250 basis point tariff hit in North America. Chief executive Elliott Hill has framed the quarter as the low point of the Win Now turnaround, so the market will read the print for evidence the bottom is in rather than for growth.
China and the marketplace reset are the catalysts that define the medium term. Management expects Greater China down approximately 20% in the fourth quarter as it reduces sell-in and cleans up the channel, and the pace at which that market stabilizes is one of the largest swing factors for the recovery. The inventory-clearance and wholesale-restoration work under the turnaround plan is the operational thread that determines when discounting eases and gross margin can expand.
The margin trajectory is the number that ultimately matters. The whole thesis turns on the operating margin climbing back from its current trough toward historical levels, so each quarter's gross-margin and operating-margin progress is the cleanest read on whether the recovery is on track. Management has guided to sequential gross-margin improvement, and delivering on that, while absorbing tariffs and a weak China, is the catalyst that would confirm the low point has passed.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- DECK (DECKERS OUTDOOR CORP)
- (no filing in the citation store)
- ONON (On Holding AG)
- (no filing in the citation store)
- CROX (CROCS, INC.)
- (no filing in the citation store)
- UAA (UNDER ARMOUR, INC.)
- (no filing in the citation store)
- LULU (lululemon athletica inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Nike fiscal 2026 Q4 guidance · company 10-Q, fiscal 2025 · company financial data