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VALUATION SCENARIOS - DISCOUNTED CASH FLOW (DCF) ANALYSIS
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📊 DYNAMIC GROWTH RATE CALCULATION FOR NKE
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

Historical Data Inputs:
  • Revenue CAGR 13yr: 4.8%
  • EPS CAGR 13yr: 2.7%
  • 📉 Moderate ROIC (10.9%) → 65% sustainability factor
  • 🔻 Bear: 2.7% × 60% = 2.0%
  • 🔺 Bull: 2.7% × 95% = 4.3%

Weighted Historical Growth: 3.8%
Industry: Apparel - Footwear \u0026 Accessories (Consumer Cyclical)
Industry Growth Modifier: +0.0%
Quality Adjustments: +0.0%

Growth Rates (10-year projection):
  🔻 Bear Case: 2.0% (conservative, recession-resistant)
  ⚖️  Base Case: 4.0% (sustainable, achievable)
  🔺 Bull Case: 6.2% (optimistic, strong execution)

Growth Rate Bounds:
  • Industry floor: 2.0%
  • Industry ceiling: 12.0%


Stock: NKE
Current Price: $65.04
Shares Outstanding: 1.48B (1,477,859,779 shares)

Base Year FCF (FY 2024): $5.2B (normalized from historical median - current year anomalous: FCF dropped 59% year-over-year)

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BEAR CASE (Probability: 25%)
Conservative: Below-trend growth, elevated risk premium, modest recession impact

📊 CASH FLOW NOTE: Using normalized FCF ($5.2B, 85% of 3-year rolling average) instead of current year FCF ($3.4B) which appears anomalous. FCF dropped 59% year-over-year. This conservative normalization reflects the company's sustainable cash generation capacity while accounting for potential headwinds.

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 2.0%
  • Discount Rate (WACC): 12.0%
  • Terminal Growth Rate: 2.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $5,315,288,000      0.8929 $4,745,792,857
2        $5,421,593,760      0.7972 $4,322,061,352
3        $5,530,025,635      0.7118 $3,936,163,017
4        $5,640,626,148      0.6355 $3,584,719,891
5        $5,753,438,671      0.5674 $3,264,655,615
6        $5,868,507,444      0.5066 $2,973,168,506
7        $5,985,877,593      0.4523 $2,707,707,032
8        $6,105,595,145      0.4039 $2,465,947,476
9        $6,227,707,048      0.3606 $2,245,773,594
10       $6,352,261,189      0.3220 $2,045,258,095
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Total PV of 10-Year FCF:            $32,291,247,435

TERMINAL VALUE:
  • Year 11 FCF: $6,479,306,413
  • Terminal Value: $64,793,064,127
  • PV of Terminal Value: $20,861,632,565

VALUATION SUMMARY:
  • Enterprise Value: $53.2B
  • Shares Outstanding: 1.48B
  • Intrinsic Value per Share: $35.97
  • Current Price: $65.04
  • Upside/Downside: -44.7%
  • Margin of Safety: -80.8%
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BASE CASE (Probability: 50%)
Balanced: Sustainable growth trajectory, market-appropriate discount rate, realistic perpetuity assumptions

📊 CASH FLOW NOTE: Using normalized FCF ($5.2B, 85% of 3-year rolling average) instead of current year FCF ($3.4B) which appears anomalous. FCF dropped 59% year-over-year. This conservative normalization reflects the company's sustainable cash generation capacity while accounting for potential headwinds.

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 4.0%
  • Discount Rate (WACC): 10.0%
  • Terminal Growth Rate: 2.5%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $5,419,509,333      0.9091 $4,926,826,667
2        $5,636,289,707      0.8264 $4,658,090,667
3        $5,861,741,295      0.7513 $4,404,012,994
4        $6,096,210,947      0.6830 $4,163,794,103
5        $6,340,059,385      0.6209 $3,936,678,061
6        $6,593,661,760      0.5645 $3,721,950,167
7        $6,857,408,230      0.5132 $3,518,934,703
8        $7,131,704,560      0.4665 $3,326,992,811
9        $7,416,972,742      0.4241 $3,145,520,475
10       $7,713,651,652      0.3855 $2,973,946,631
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Total PV of 10-Year FCF:            $38,776,747,280

TERMINAL VALUE:
  • Year 11 FCF: $7,906,492,943
  • Terminal Value: $105,419,905,906
  • PV of Terminal Value: $40,643,937,294

VALUATION SUMMARY:
  • Enterprise Value: $79.4B
  • Shares Outstanding: 1.48B
  • Intrinsic Value per Share: $53.74
  • Current Price: $65.04
  • Upside/Downside: -17.4%
  • Margin of Safety: -21.0%
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BULL CASE (Probability: 25%)
Optimistic: Strong execution, market share gains, operating leverage, sustained competitive advantages

📊 CASH FLOW NOTE: Using normalized FCF ($5.2B, 85% of 3-year rolling average) instead of current year FCF ($3.4B) which appears anomalous. FCF dropped 59% year-over-year. This conservative normalization reflects the company's sustainable cash generation capacity while accounting for potential headwinds.

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 6.2%
  • Discount Rate (WACC): 9.0%
  • Terminal Growth Rate: 3.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $5,532,088,286      0.9174 $5,075,310,354
2        $5,872,886,064      0.8417 $4,943,090,703
3        $6,234,678,287      0.7722 $4,814,315,577
4        $6,618,758,294      0.7084 $4,688,895,242
5        $7,026,499,097      0.6499 $4,566,742,299
6        $7,459,358,291      0.5963 $4,447,771,629
7        $7,918,883,266      0.5470 $4,331,900,328
8        $8,406,716,736      0.5019 $4,219,047,652
9        $8,924,602,611      0.4604 $4,109,134,963
10       $9,474,392,235      0.4224 $4,002,085,669
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Total PV of 10-Year FCF:            $45,198,294,415

TERMINAL VALUE:
  • Year 11 FCF: $9,758,624,002
  • Terminal Value: $162,643,733,360
  • PV of Terminal Value: $68,702,470,645

VALUATION SUMMARY:
  • Enterprise Value: $113.9B
  • Shares Outstanding: 1.48B
  • Intrinsic Value per Share: $77.07
  • Current Price: $65.04
  • Upside/Downside: +18.5%
  • Margin of Safety: 15.6%
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SENSITIVITY ANALYSIS - Intrinsic Value per Share
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How intrinsic value changes with different growth and discount rates:

Growth →           3%          5%          8%         10%         12%         15%   
WACC ↓      ------------------------------------------------------------------
   8%    $    68   $    80   $   101↑  $   118↑  $   138↑  $   174↑ 
   9%    $    58↓  $    67   $    84   $    98↑  $   114↑  $   143↑ 
  10%    $    50↓  $    58↓  $    72   $    83   $    97↑  $   121↑ 
  11%    $    44↓  $    51↓  $    63   $    72   $    84   $   104↑ 
  12%    $    39↓  $    45↓  $    55↓  $    64   $    73   $    90↑ 

Current Price: $65.04
Base FCF: $5,211,066,667M
Terminal Growth: 2.5% (constant)

Legend: ↑ = 30%+ upside  |  ↓ = 10%+ downside
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PROBABILITY-WEIGHTED VALUATION
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Bear Case (35.97) × 25%  = $8.99
Base Case (53.74) × 50%  = $26.87
Bull Case (77.07) × 25%  = $19.27

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Weighted Average Intrinsic Value: $55.13
Current Price: $65.04
Upside/Downside: -15.2%
Margin of Safety: -18.0%
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