Nike (NKE) Valuation Case Study
A note on authorship: The research, analysis, and opinions in this article are the author's own. Claude (Anthropic's AI) assisted with drafting and editing the prose.
Every number below is mechanical output — the KashVector DCF tool's free cash flow, discount rate, and growth inputs run through a fixed formula, not an opinion on Nike's brand, turnaround plan, management, or competitive position. This is a single-company case study built around a sensitivity table: instead of showing one verdict, it shows how that verdict moves as the two assumptions that matter most — growth and free cash flow — are dialled up. All figures are live as of 12 September 2026, at a price of $36.80. It is not a recommendation on the stock.
The short version:
- Nike is down 52% from its 52-week high and sitting one dollar above its 52-week low.
- The tool's own Base case: $13.58 intrinsic value vs a $36.80 price, a -63.1% margin of safety (Overvalued) — and Bear ($11.04, -70.0%) and Bull ($16.98, -53.8%) are both Overvalued too.
- The reason isn't the falling price — it's a free cash flow base that has fallen faster: $6.62B two fiscal years ago to $1.89B today.
- Dial growth up on its own (holding cash flow flat) and Nike only reaches Fairly Valued around +20% growth for five straight years — a real recovery in cash flow does more work than growth alone.
- Across a realistic recovery range, almost every combination of growth and cash-flow recovery still tops out at Fairly Valued, not Undervalued.
What the tool says on autopilot
Nike is a plain-DCF company — Consumer Cyclical, not a bank, REIT, or utility — so it gets the standard model, no special-case adjustment. Because the tool's own growth input comes out negative, it automatically switches to the fading-growth version of the DCF, which projects cash flow shrinking for five years (at a different rate in each scenario) before settling into a 2.5% terminal growth rate forever after.
| 5-yr FCF growth | WACC | Intrinsic | vs $36.80 | Verdict | |
|---|---|---|---|---|---|
| Bear | -7.5% | 10.84% | $11.04 | -70.0% | Overvalued |
| Base | -5.0% | 9.84% | $13.58 | -63.1% | Overvalued |
| Bull | -2.5% | 8.84% | $16.98 | -53.8% | Overvalued |
All three scenarios land Overvalued — the "bull" case here is simply "the decline is a little less bad," not "Nike is growing." Terminal growth is fixed at 2.5% (long-run economic growth) in every scenario, so the spread between the three comes entirely from how fast cash flow keeps shrinking over the next five years and the WACC paired with it.
Why the number is so low
Two things are doing the work, and it's worth separating them from the share price entirely:
1. The base-year cash flow is at a fresh, multi-year trough. Nike's trailing-twelve-month free cash flow is $1.89B. Its last four full fiscal years, from Nike's own reported financials: FY2023 $4.87B, FY2024 $6.62B (the recent peak), FY2025 $3.27B, FY2026 $2.18B. The trailing figure the tool actually uses is lower again than that last full-year number — meaning the most recent quarters are running below even FY2026's already-reduced pace. This isn't a one-quarter blip; it's a two-year slide from a real peak.
2. The model then assumes that slide continues. Every scenario above projects further shrinkage (-2.5% to -7.5% a year) for five years before flattening out. That's the fading-growth engine reading the recent trend and extending it forward — a deliberately mechanical, unsentimental extrapolation, not a view on whether Nike's own turnaround plan will work.
Put together: a small base, assumed to keep shrinking, discounted at just under 10% a year. That combination is what produces $11-17 a share, regardless of what the market thinks the brand is worth.
Now you drive it — Sweep 1: growth, holding cash flow flat
The tool's own scenarios assume the recent decline continues. What if you override that and assume Nike's cash flow stops shrinking and starts growing instead — holding the base at today's $1.89B, varying only the 5-year growth rate, same 9.84% discount rate throughout?
| 5-yr growth | Intrinsic | vs $36.80 | Verdict |
|---|---|---|---|
| 0% | $14.64 | -60% | Overvalued |
| +5% | $18.44 | -50% | Overvalued |
| +10% | $22.99 | -38% | Overvalued |
| +15% | $28.38 | -23% | Overvalued |
| +20% | $34.75 | -6% | Fairly Valued |
| +25% | $42.20 | +15% | Fairly Valued |
| +30% | $50.88 | +38% | Undervalued |
Growth on a small base moves the needle less than it sounds like it should. It takes five straight years of roughly +20% annual growth — off a base that's currently shrinking, not growing — just to cross into Fairly Valued. Only an implausible +30% flat growth rate, sustained for five years, clears into Undervalued. On its own, growth is not the lever that fixes this valuation.
The lever that actually matters — Sweep 2: base cash flow
Now hold growth fixed at a modest +5% and vary the one input Nike would actually need to move: the free cash flow base itself.
| Base FCF | Intrinsic | vs $36.80 | Verdict |
|---|---|---|---|
| $1.9B (now) | $18.44 | -50% | Overvalued |
| $2.5B | $24.84 | -32% | Overvalued |
| $3.0B | $30.09 | -18% | Fairly Valued |
| ~$3.64B | ≈$36.80 | ~0% | fair-value break-even |
Run the reverse question directly — how much sustainable free cash flow would Nike need to justify today's $36.80 price, at a few different flat growth rates — and the answer is: at 0% growth, about $4.51B; at +5% growth, about $3.64B; at +10% growth, about $2.96B. Even the most forgiving of those (+10% growth and $2.96B of cash flow) is close to double where Nike is running today, and still only reaches break-even, not cheap. For reference, Nike hasn't generated $3.64B of free cash flow since fiscal 2023 ($4.87B that year) — and its more recent FY2024 peak was $6.62B, which this article deliberately doesn't lean on as the "realistic" recovery case below, since a one-year high two years back isn't the same as a sustained run rate.
The turnaround grid — both levers together, realistic range only
The real question isn't "growth OR recovery" — it's how much of each, together, gets Nike to a genuinely cheap verdict. This grid caps free cash flow at $1.9-3.0B: a real recovery, but well short of the FY2024 peak, and treated here as the realistic near-term ceiling for this story rather than a return to Nike's best-ever year.
| FCF \ growth | +3% | +5% | +8% | +10% | +15% |
|---|---|---|---|---|---|
| $1.9B (now) | $17 | $18 | $21 | $23 | $28 |
| $2.5B | $23 | $25 | $28 | $31 | $38 |
| $3.0B | $28 | $30 | $34 | $37 | $46 |
Read against the $36.80 price: only the single most generous corner of this grid — free cash flow recovering all the way to $3.0B and growing at roughly +15% a year, simultaneously, for five straight years — clears into Undervalued territory ($46, roughly +25%). Every other cell, including $3.0B of cash flow paired with a very respectable +10% growth rate, tops out at Fairly Valued at best. Nothing in the realistic range makes Nike look cheap; the best case in this grid gets it to fair.
Try it yourself Run your own growth and cash-flow assumptions on NKE → Discounted Cash Flow CalculatorFor the full mechanics behind every number above — how free cash flow is derived, how the discount rate is built, and when the model switches to a fading-growth projection — see the companion explainer, plus Nike's own live ticker page for current price and trend charts:
- How to Value a Stock: DCF and the Dividend Discount Model →
- Nike (NKE) full ticker page → — current price, valuation and trend charts
- Deckers (DECK) vs Nike (NKE): Same DCF, Opposite Verdicts → — the companion piece: a footwear company with growing revenue and net cash, on the other side of the verdict