Reassessing Nike (NKE) Valuation After a Steady Earnings Expansion and Share Price Pullback

NIKE (NKE) shares have been grinding lower this year even as the company continues to post steady revenue and faster growing earnings, leaving investors debating whether the pullback is a value opportunity.

See our latest analysis for NIKE.

At around $63.54, NIKE’s 30 day share price return has turned positive even as the 1 year total shareholder return is still firmly negative. This suggests sentiment is stabilising rather than surging and investors are cautiously reassessing growth versus execution risks.

If NIKE’s wobble has you rethinking your options, this could be a good moment to explore auto manufacturers as another way to find consumer focused names with different growth and risk profiles.

With earnings still growing faster than sales and the share price lagging its history, NIKE now trades at a discount to analyst targets. The key question is whether Wall Street is overlooking a rebound or correctly pricing in muted future growth.

Most Popular Narrative: 34.2% Undervalued

With NIKE last closing at $63.54 and the narrative fair value at $96.60, one detailed thesis argues the market is underestimating its long term earnings power.

With pretty conservative estimates I am seeing Nike hitting at least $100 roughly in 3 years. However this is with a revenue growth of 2%. I believe that leadership can help get that number closer to 5% within the next 2 years however, and that also is a conservative number.

Read the complete narrative.

Curious how steady top line expansion, margins holding firm, and a richer future earnings multiple combine to justify that gap between price and value? The narrative breaks down the exact growth path, profitability assumptions, and rerating needed to bridge today’s share price to that higher target.

Result: Fair Value of $96.60 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, a weaker consumer backdrop or continued missteps in product innovation and marketing could prevent NIKE from achieving the growth assumed in this thesis.

Find out about the key risks to this NIKE narrative.

Another Lens on Valuation

While the user narrative leans on long term growth and a richer future earnings multiple, our take using the price to earnings ratio is more cautious. NIKE trades on 32.4 times earnings versus a 27.9 times fair ratio and 21.5 times for the US Luxury group, which suggests valuation risk if sentiment weakens again.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own NIKE Narrative

If you are not fully aligned with these views or want to dig into the numbers yourself, you can build a personalised thesis in minutes with Do it your way.

A great starting point for your NIKE research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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