Is Nike Stock A Real Bargain

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Nike (NKE) stock trades at 18.4 times earnings, against 22.8 for the median S&P 500 company. That discount came with a steep fall : the stock lost 41.1% over the past year while the S&P 500 returned 13.3%. But the company earned more over its last twelve months than in the twelve before. So is Nike's low multiple a markdown on a sound business, or a fair price for what it now earns?

What Are Nike Buyers Getting At This Price?

Buyers are getting a shoe company first. Footwear brought in $30.5 billion of Nike's $46.4 billion revenue in fiscal 2026, with Apparel making up most of the rest. Over the four quarters to August 31, 2026, Nike's operating margin was 8.2%, up from 7.4% a year earlier. Net income rose to $3.09 billion from $2.90 billion, which is the profit today's multiple is measured on.

Nike's sports performance business is growing, too. On the fiscal Q1 2027 call, held October 1, 2026, management said NIKE Performance grew by high single digits in the quarter, posting double-digit growth in Running, Global Football, Tennis and Golf. On these results alone, the markdown looks real.

Nike's Margin Is Still Below Its Three-Year Average

Over a longer stretch, the improvement looks like a partial rebound from a bad year. Nike's 8.2% operating margin over the latest twelve months is still below 9.1%, its average across the three twelve-month periods ending each August from 2024 to 2026. In the four quarters to August 31, 2024, the margin was 11.8%. Revenue fell in each of those three periods, though the latest drop of 1.2% was smaller than the 3.7% average.

Management named where sales are falling now. NIKE Sportswear, accounting for just under half of fiscal Q1 2027 revenue, fell by low double digits in the quarter, and Greater China revenue fell 26%. As planned, Nike also cut revenue from the Dunk by nearly 50% in the quarter, a hit of roughly $200 million to Sportswear. That is the case for the low multiple. Management says NIKE Sportswear, Jordan Brand and Greater China need more work, and all three were still shrinking in the latest quarter.

When a line that brings in much of a company's sales shrinks, the whole company shrinks with it. As a case in point, Tesla drew 98% of last quarter's deliveries from the Model 3 and Model Y, and its deliveries fell two years in a row. Read Trefis Big Story: How Tesla Blundered.

What Is Nike Doing To Turn The Business Around?

Nike's answer is a plan called Pace, from which management expects about $2.5 billion in savings. Management expects most of the savings to arrive in fiscal 2029 and 2030, though, and puts the cost of the plan at about $1 billion.

Before then, management expects a weaker fiscal 2027. It expects revenue to fall by a high single-digit percentage, with EBIT, earnings before interest and taxes, falling by a larger percentage than revenue. So for fiscal 2027, management itself expects the profit rebound to reverse.

A buyer at this price, then, is not betting on a sound business the market has overlooked. The bet is that Nike returns to growth by the time most of the savings arrive, through Pace and its work on NIKE Sportswear, Jordan Brand and Greater China. NIKE Sportswear's revenue, which fell by low double digits in fiscal Q1 2027, is the number to watch when Nike next reports, expected in December 2026. Before that, Nike plans to host an Investor Day on November 16-17, 2026, where management said it will lay out a financial plan for the next five years.

Does This Mean You Should Act On NKE?

Our purpose is to inform you with unique data so you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.

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