Are You Overpaying For Nike Stock Versus Its Rivals

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Nike (NKE) stock lost 42.1% over the past year, including dividends, compared with a 15.1% gain for the S&P 500. Even after that decline, Nike investors pay more for each dollar of earnings than shareholders of most apparel companies in its peer group. At the same time, Nike's sales growth and profit margin trail nearly all of them. How wide is the gap between what you pay for Nike and what the business delivers?

Nike Costs More Than Tapestry Yet Grows Slower

Nike's price against its earnings is the second highest among the four companies in its group with a comparable figure, while its sales growth and operating margin both rank fourth out of five. Nike trades at 18.4 times its earnings over its latest four fiscal quarters, compared with 15.0 times for Tapestry (TPR). Over each company's latest four quarters, Nike's revenue fell 1.2%, while Tapestry's revenue grew 14.2%.

Nike also keeps far less of each sale as profit. The company posted an 8.2% operating margin, well below the 23.9% margin at Tapestry. Only Ralph Lauren (RL) costs more than Nike and grows faster, trading at 23.4 times earnings alongside a 14.7% increase in revenue. Within this peer group, Nike's higher price does not come with faster growth or a wider margin.

Where Nike's Sales Grow And Where They Fall

Nike is primarily a shoe company, with footwear bringing in $30.5 billion of its $46.4 billion in revenue for fiscal 2026. Across the business, management is deliberately shrinking one part while another grows. During fiscal Q1 2027, Nike's performance business, the products made for sports such as running, football, tennis and golf, grew by high single digits.

NIKE Sportswear made up just under half of the quarter's revenue and fell by low double digits. Part of that decline was planned. Management cut revenue from the Dunk sneaker by nearly 50% in the quarter, a hit of roughly $200 million. Nike is also cutting supply across key parts of the marketplace, aiming to sell more at full price.

Greater China is undergoing the same reset. Revenue there fell 26% in the quarter as Nike pulled out of discount-prone digital channels, and management expects sales and profit in the region to suffer in the near term. Shareholders paying above most of the group appear to be betting that Nike's sports lines will grow enough to outweigh what management is cutting.

What Nike Expects For Fiscal 2027

Management expects Nike's sales and profit to fall in fiscal 2027. Revenue is projected to decline in the high single digits, with earnings before interest and taxes dropping by a greater percentage than revenue. The company also expects pressure on reported revenue to last into fiscal 2028. Management plans to set out its long-term growth plan at an Investor Day in November.

So far, Nike's sports lines have grown while its total revenue still fell. Shareholders paying more than for most of the group need Nike to change that. Nike is expected to report its next quarterly results in December 2026, and the measure to watch is how fast its performance business grows against the fall in NIKE Sportswear.

Does This Mean You Should Act On NKE?

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

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