Nike, Inc. is a global designer and marketer of athletic footwear, apparel and equipment with a historically high-return, asset-light profile that currently combines strong balance-sheet metrics and gross margins with recent declines in earnings and cash flow.
The company still exhibits structural strengths: gross margin sits at about 40.8% and has been broadly stable, reflecting pricing power (Profit Margin Trends); trailing twelve‑month return on equity remains elevated at roughly 17.9% and has never fallen below 15% over the period shown (Return on Equity (ROE)). Liquidity and leverage are conservative — the current ratio is about 2.06, debt-to-equity roughly 0.57 and interest coverage is very high at about 41.6x — and free cash flow margin averages near 11.0%, supporting ongoing capital allocation flexibility.
There are meaningful areas of weakness to monitor. Diluted EPS has contracted sharply year-over-year (recent 1‑year EPS change around -50.1%) and most recently measures about $1.50 per share while revenue per share is about $31.02, showing earnings have fallen much faster than top-line per‑share sales (EPS Diluted & Revenue per Share). Trailing operating cash flow has deteriorated substantially to $1.69B (TTM) from a peak near $7.89B, and trailing net income has fallen to about $2.25B (TTM), with quarterly net margin compressed to roughly 4.8% versus historical averages above 10% (Revenue & Net Income;Earnings Quality Analysis). The trailing P/E is elevated at about 40.7x, which embeds high expectations for near‑term recovery (Price-to-Earnings (PE) Ratio Trend).
Key fundamentals to watch going forward include operating cash flow (currently $1.69B TTM) and trailing net income ($2.25B TTM) and whether diluted EPS growth (most recent EPS $1.50) reverts toward revenue-per-share trends (about $31.02, 1‑yr change -2.7%) as well as sequential margin stabilization (gross ~40.8%, operating ~6.0%, net ~4.8%) and the trajectory of ROE. Also monitor capital allocation and cash conversion relative to earnings and the P/E trend (about 40.7x) as indicators of whether earnings and cash‑flow weakness are transitory or persistent.
The foundation of business quality and long-term value creation
NIKE, Inc.'s revenue has generally ranged between about $10B and $13.5B over the series, with a peak at $13.39B in the quarter ending 2023-11-30 and a pandemic low of $6.31B in the quarter ending 2020-05-31. In the most recent year-to-date sequence, revenue showed modest volatility: after $11.27B (2025-02-28) and $11.10B (2025-05-31), it rose to $12.43B (2025-11-30) before declining to $11.28B in the quarter ended 2026-02-28.
Net income has been more variable than revenue, with notable highs above $1.5B in several 2023–2024 quarters and a loss of -$790.0M in 2020-05-31. Over the last four quarters, net income moved from $794.0M (2025-02-28) to $211.0M (2025-05-31), recovered to $792.0M (2025-11-30), and then fell to $520.0M in the most recent quarter. The most recent quarterly revenue was $11.28B and net income was $520.0M.
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Mar 2025 to Feb 2026, Nike Inc converts approximately 41¢ of every revenue dollar into gross profit (gross margin: 40.8%).After accounting for operating expenses and taxes and expenses, the company retains 4.8% as net profit margin, resulting in $2.25B in net earnings.
Period Information
Report Type: Annual (10-K)
Period: Mar 2025 to Feb 2026
Revenue composition by disclosure category for the latest period
No explicit information about product lines, service categories, or specific sources of revenue is present in the provided Item 1 excerpt.
No explicit information about customer types, end markets, or any significant customers is present in the provided Item 1 excerpt.
No explicit information about geographic revenue sources or regional operations is present in the provided Item 1 excerpt.
No explicit information about distribution methods, sales channels, or go-to-market approaches is present in the provided Item 1 excerpt.
No explicit information indicating whether revenue is recurring or transactional is present in the provided Item 1 excerpt.
No explicit information about customer concentration, dependencies, switching costs, pricing power, or other concentration risks is present in the provided Item 1 excerpt.
Analyzing long-term margin stability and competitive positioning
NIKE, Inc.'s profit margins were materially higher in 2020–2022, with gross margins in the mid-40s and operating and net margins in the low-to-mid teens. From early 2022 onward the data show a clear downward trend across all three margins; gross margin declined from a peak around 46.2% (2022-02-28) while operating and net margins fell from the mid-teens and low-teens respectively.
The most recent five quarters show steady compression:
indicating continued sequential erosion with operating and net margins declining more in absolute terms than gross margin. The most recent gross margin was 40.8%, the most recent operating margin was 6.0%, and the most recent net profit margin was 4.8%.
Understanding Profit Margins
Between Mar 2025 and Feb 2026, Nike Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
Over the last five reported TTM points, NIKE, Inc. shows a clear downward trend in both metrics: operating cash flow fell from $5.85B (TTM at 2025-02-28) to $1.69B (TTM at 2026-02-28) with sequential readings of $3.70B, $3.53B and $3.06B in between, while trailing twelve‑month net income declined from $4.51B to $2.25B over the same sequence ($3.22B, $2.90B, $2.52B). The most recent quarter (period end 2026-02-28) is an inflection where reported net income ($2.25B) exceeds operating cash flow ($1.69B), reversing the longer stretch when cash flow generally tracked above earnings.
Over the multi-year history shown, operating cash flow reached a peak of $7.89B (TTM at 2024-08-31) and frequently exceeded net income in earlier periods; net income’s largest reading in the series was $6.17B (TTM at 2021-11-30). The most recent trailing twelve‑month operating cash flow was $1.69B and the most recent trailing twelve‑month net income was $2.25B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
NIKE, Inc.'s trailing twelve-month ROE has shown wide variation over the period presented. The series peaked near the end of 2018/early 2019 (high of 48.9%) then fell into the high-20s in 2020 (26.6%) before rebounding through 2021 into the mid-to-high 30s and low 40s (for example 44.9% in 2021-05-31 and multiple quarters around 36–39% in 2022–2023).
Beginning in mid-2024 the ROE has declined across consecutive quarters: 39.5% (), 34.8% (), 24.4% (), 21.5% () and 17.9% (), showing a clear downward trend in the most recent year. The most recent ROE was 17.9%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
NIKE, Inc.'s operating cash flow (TTM) shows a clear downtrend over the last several quarters, falling from a peak around $7.89B at 2024-08-31 to $1.69B at 2026-02-28. The decline is gradual through early 2025 (e.g., $7.06B on 2024-02-29 to $5.85B on 2025-02-28) and becomes steeper between 2025-02-28 and 2026-02-28 (from $5.85B to $1.69B), with notable step downs at the 2025-05-31 and subsequent quarter marks.
Investing cash flow (TTM) shifted from sustained positive inflows in 2023–early 2024 (peaking at $1.61B on 2024-02-29) to net outflows beginning 2024-11-30 and remaining modestly negative since (ranging roughly between -$579M and -$143M before the most recent -$262.0M). Financing cash flow (TTM) has been negative across the full series, reaching larger outflows in 2022–2023 (around -$7.64B at 2023-08-31) and moderating to smaller outflows more recently (moving from about -$5.9B in 2024 to -$3.42B on 2026-02-28).
The most recent trailing twelve-month operating cash flow was $1.69B; investing cash flow was -$262.0M; financing cash flow was -$3.42B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
NIKE, Inc.'s trailing twelve-month price-to-earnings ratio has moved through distinct phases over the period shown. In the early 2010s the P/E generally sat in the mid-teens to low-20s, then rose sharply through 2018–2021 with multiple peaks (notably 71.5x on 2020-11-30 and 60.2x on 2021-02-28). Following that period, the ratio declined into the low-to-mid 20s across 2022–mid 2024, with a trough near 23.0x on 2024-08-31.
More recently the P/E has rebounded and accelerated: 24.3x (2024-11-30), 26.4x (2025-02-28), 28.7x (2025-05-31) and then a larger move to 38.5x (2025-08-31), 38.9x (2025-11-30) and 40.7x most recently. The most recent quarterly price-to-earnings ratio for NIKE, Inc. was 40.7x.
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.