On July 15, 2026, we take a closer look at the discounted cash flow (DCF) analysis for Nike Inc NKE. The company has faced significant price performance challenges, with a year-to-date decline of 31.7% and a one-year drop of 39.0%. Below are some key highlights from our analysis:
- DCF Earnings-based intrinsic value of $26.07 compared to the current price of $42.86, indicating a margin of safety of -64.4%.
- DCF Free Cash Flow (FCF)-based intrinsic value of $9.38, providing a second opinion on valuation.
- GF Scoreâ„¢ of 70/100, suggesting a reliable assessment of the DCF inputs.
What Is NKE Worth? DCF Earnings-Based Model
The DCF analysis for Nike Inc is structured into two stages: the growth phase and the terminal phase. In the growth phase, we project earnings per share (EPS) growth at 6.2% annually for the first ten years, which is then discounted at a rate of 11%. Following this period, we assume a terminal growth rate of 4% for the subsequent ten years, also discounted at 11%. Below are the assumptions used in our DCF model:
| Parameter | Value |
|---|---|
| Current EPS (TTM, excl. non-recurring) | $2.09 |
| 10-Year Growth Rate | 6.2% |
| 10-Year Treasury Rate | 4.61% |
| Discount Rate (ceil(Treasury) + 6%) | 11% |
| Terminal Growth Rate | 4% |
The calculation summary for the DCF model is as follows:
| Stage | Description | Value |
|---|---|---|
| Growth Stage (Years 1-10) | EPS growing at 6.2%, discounted at 11% | $16.52 |
| Terminal Stage (Years 11-20) | 4% terminal growth, discounted at 11% | $9.55 |
| Intrinsic Value | Growth + Terminal | $26.07 |
Comparing the current price of $42.86 with the intrinsic value of $26.07 indicates that Nike Inc is modestly overvalued, with a margin of safety of -64.4%. It is important to note that GuruFocus uses EPS without non-recurring items, as research shows stock prices correlate more closely with earnings than free cash flow. For a detailed breakdown, visit the NKE DCF Calculator.
What Does the Free Cash Flow DCF Say?
The intrinsic value based on the Free Cash Flow (FCF) DCF model is calculated at $9.38. When comparing this with the earnings-based intrinsic value of $26.07, the two models disagree significantly. The FCF-based valuation indicates that Nike Inc is significantly overvalued, with a margin of safety of -356.9%.
How Does GF Valueâ„¢ Compare to the DCF Models?
The GF Valueâ„¢ for Nike Inc is calculated at $74.92, suggesting that the stock is 42.8% undervalued based on GuruFocus' proprietary measure. This value is derived from historical trading multiples, past business growth, and future performance estimates. While the DCF models indicate overvaluation, the GF Valueâ„¢ presents a contrasting perspective, highlighting the importance of considering multiple valuation methods. For more insights, visit the GF Valueâ„¢ page.
What Does NKE's GF Scoreâ„¢ Tell Us?
The GF Scoreâ„¢ ranks stocks from 0 to 100 based on five key aspects: Financial Strength, Profitability, Growth, Valuation, and Momentum. Stocks with higher GF Scoreâ„¢ values have been found to generate higher long-term returns (backtested 2006-2021). Below is the GF Scoreâ„¢ breakdown for Nike Inc:
| Metric | Rating |
|---|---|
| GF Scoreâ„¢ | 70/100 |
| Financial Strength | 5/10 |
| Profitability | 8/10 |
| Growth | 6/10 |
| Valuation | 4/10 |
| Momentum | 2/10 |
The predictability rank for Nike Inc is 1/5 stars, indicating that the DCF model may be less reliable for this stock. For more details, visit the NKE stock page.
Key Assumptions and Limitations
It is essential to recognize that DCF models are highly sensitive to growth rate and discount rate assumptions. Stocks with low predictability ratings, such as Nike Inc, produce less reliable DCF estimates. The terminal growth rate of 4% used in this analysis is a simplifying assumption that may not reflect future market conditions.
What This Means for Investors
In summary, the three valuation models present a clear verdict on Nike Inc. The DCF earnings model indicates modest overvaluation, while the FCF model suggests significant overvaluation. In contrast, the GF Valueâ„¢ presents a more favorable view of the stock. Overall, Nike Inc appears to be overvalued based on the consensus of these models. For the full DCF analysis, visit the NKE DCF Calculator. You can also explore the GF Valueâ„¢ page, or use the GuruFocus Stock Screener to find undervalued predictable companies.
Frequently Asked Questions
What is NKE's intrinsic value based on DCF?
[Answer: earnings-based $26.07, FCF-based $9.38]
Is NKE overvalued or undervalued?
[Answer using DCF + GF Valueâ„¢ consensus]
How reliable is the DCF model for NKE?
[Answer using predictability rank 1/5]
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
