What is NKE's Intrinsic value?

Nike Inc (NKE) Intrinsic Value Analysis

Executive Summary

As of August 2, 2025, Nike Inc's estimated intrinsic value ranges from $35.51 to $112.41 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $112.41 +50.6%
Discounted Cash Flow (5Y) $89.53 +20.0%
Dividend Discount Model (Multi-Stage) $73.76 -1.2%
Dividend Discount Model (Stable) $35.51 -52.4%
Earnings Power Value $37.16 -50.2%

Is Nike Inc (NKE) undervalued or overvalued?

With the current market price at $74.62, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Nike Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.84 0.99
Cost of equity 7.7% 10.4%
Cost of debt 4.0% 4.6%
Tax rate 14.6% 15.8%
Debt/Equity ratio 0.07 0.07
After-tax WACC 7.4% 9.9%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $46,309 (FY05-2025) to $71,610 (FY05-2035)
  • Net profit margin expansion from 7% to 20%
  • Capital expenditures maintained at approximately 2% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $90 $132,731M 78.1%
10-Year Growth $112 $166,526M 62.8%
5-Year EBITDA $57 $84,434M 65.6%
10-Year EBITDA $79 $117,406M 47.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 71.5%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.0%
  • Long-term growth rate: 3.0%
  • Fair value: $73.76 (-1.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.4% (Low) to 7.7% (High)
  • Long-term growth rate: 2.0% (Low) to 4.0% (High)
  • Fair value range: $18 to $53
  • Selected fair value: $35.51 (-52.4% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $4,709M
Discount Rate (WACC) 9.9% - 7.4%
Enterprise Value $47,352M - $63,423M
Net Debt $502M
Equity Value $46,850M - $62,921M
Outstanding Shares 1,477M
Fair Value $32 - $43
Selected Fair Value $37.16

Key Financial Metrics

Metric Value
Market Capitalization $110206M
Enterprise Value $110708M
Trailing P/E 34.24
Forward P/E 23.73
Trailing EV/EBITDA 7.45
Current Dividend Yield 208.70%
Dividend Growth Rate (5Y) 8.86%
Debt-to-Equity Ratio 0.07

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $33.72
Discounted Cash Flow (5Y) 25% $22.38
Dividend Discount Model (Multi-Stage) 20% $14.75
Dividend Discount Model (Stable) 15% $5.33
Earnings Power Value 10% $3.72
Weighted Average 100% $79.90

Investment Conclusion

Based on our comprehensive valuation analysis, Nike Inc's intrinsic value is $79.90, which is approximately 7.1% above the current market price of $74.62.

Key investment considerations:

  • Strong projected earnings growth (7% to 20% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.07)
  • Historical dividend growth of 8.86%

Given these factors, we believe Nike Inc is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.