NIKE's Premium Valuation: Overpriced Stock or Long-Term Value Bet?

NIKE Inc. NKE remains fundamentally strong, supported by decisive steps to reposition the business for sustainable, profitable long-term growth. However, its current forward 12-month price-to-earnings (P/E) ratio of 30.94X raises valuation concerns. This multiple exceeds the Zacks Shoes and Retail Apparel industry average of 25.96X, making NIKE’s stock appear relatively expensive.

Adding to investor caution, the company’s elevated price-to-sales (P/S) ratio affects enthusiasm. The Beaverton, OR-based athletic giant trades at a forward 12-month P/S of 1.93X, above the industry’s 1.66X. Coupled with its Value Score of D, this suggests NIKE may not present a compelling value opportunity at current levels despite its strong fundamentals and brand leadership.

NIKE’s Premium Valuation Surpasses Peers

At 30.94X P/E, the Swoosh brand owner is trading at a much higher valuation than its competitors. Its peers, such as adidas AG ADDYY, Steven Madden SHOO and Wolverine World Wide WWW, are delivering solid growth and trade at more reasonable multiples. adidas, Steven Madden and Wolverine have forward 12-month P/E ratios of 15.97X, 19.5X and 10.83X — all significantly lower than NIKE. At such levels, NKE’s valuation seems out of step with its growth trajectory, especially given the recent decrease in its stock price.

NIKE’s elevated valuation underscores investors’ high growth expectations. However, compared with key competitors, the company appears increasingly vulnerable as market participants turn cautious toward overpriced Consumer Discretionary stocks. NKE’s ability to consistently deliver on or exceed these expectations will be critical to sustaining its premium valuation.

NIKE shares have fallen 17.5% year to date compared with a 20.4% decline in the broader industry. Still, the stock has underperformed the Consumer Discretionary sector’s 1.4% rally and the S&P 500’s 16.7% growth in the same period.

Among peers, NIKE’s performance has been relatively resilient. Shares of adidas and Wolverine World Wide have plunged 24.4% and 25.5%, respectively, year to date, while Steven Madden has fared slightly better with a smaller 11.6% decline.

NKE’s YTD Stock Performance

At the current price of $62.11, the NKE stock trades 24.7% below its 52-week high of $82.44. The current stock price is 18.8% above its 52-week low mark of $52.28. NKE trades below its 50 and 200-day moving averages, indicating a bearish sentiment.

NIKE Stock Trades Below 50 & 200-Day Moving Averages

What’s Affecting NKE’s Performance?

NIKE is navigating a transitional phase, marked by a blend of structural realignment, macroeconomic pressures and uneven regional performance. The company’s fundamentals remain solid, but near-term performance is being weighed down by structural headwinds and the lingering impacts of its transformation efforts. Despite a first-quarter fiscal 2026 revenue beat, underlying fundamentals reveal a business still recalibrating for sustainable growth.

NIKE’s profitability is under strain from margin headwinds, led by new tariffs, elevated product costs, and a mix shift toward wholesale and discounted channels. The company estimates tariffs alone will cost $1.5 billion annually, pressuring the gross margin by 120 basis points (bps). NIKE is deliberately reducing promotional activity in its stores and online platforms to protect long-term brand strength, even though this has temporarily dampened sales momentum. At the same time, margin pressures from supply-chain costs and a cautious consumer backdrop continue to affect results.

Regionally, North America is showing encouraging signs of progress, supported by strong execution in running, training and basketball. However, Greater China remains a soft spot, with weaker store traffic and a marketplace still burdened by elevated promotional activity. The digital business, once a key growth engine, is undergoing a reset as NIKE works to rebuild full-price sales and reengage consumers through better assortments and storytelling.

Management’s “Win Now” and “Sport Offense” initiatives are central to NIKE’s recovery. These efforts aim to simplify operations, sharpen focus on sport-led innovation, and create a more integrated global marketplace. While these actions are beginning to stabilize the business, NIKE’s comeback will take time, hinging on its ability to reignite brand heat, lift margins, and adapt to evolving consumer behavior across regions and channels.

NIKE’s Estimate Revision Trend

The Zacks Consensus Estimate for NIKE’s fiscal 2026 and 2027 earnings per share (EPS) has been unchanged in the past 30 days. For fiscal 2026, the Zacks Consensus Estimate for NKE’s revenues implies 0.6% year-over-year growth, while EPS suggests a 23.6% year-over-year decline. The consensus mark for fiscal 2027 revenues and EPS indicates 5.2% and 50.5% year-over-year growth, respectively.

Is it Wise to Retain Positions in NKE Stock?

NIKE’s story remains one of strong fundamentals, challenged by near-term pressures and an expensive valuation. Despite the brand’s enduring global leadership and steady long-term strategy, the stock’s performance tells a more cautious tale — shares have lost notably year to date, underperforming broader benchmarks while trading below key moving averages. This decline, set against a still-premium valuation, highlights investor unease on whether NIKE’s growth can justify its lofty multiples.

However, the stability in earnings estimate revisions suggests analysts maintain confidence in the company’s underlying trajectory. NIKE’s near-term profitability may be constrained by cost inflation, tariffs and uneven regional trends, but management’s structural initiatives, focused on innovation, marketplace elevation and digital reset, provide a foundation for recovery. 

As investors weigh valuation against execution risks, the Zacks Rank #3 (Hold) company’s ability to reignite growth and restore margin strength will determine whether the recent stock weakness presents a long-term buying opportunity or a valuation reset in progress.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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