Nike in My ISA: A Weaker Business, but Better Value?

Estimated reading time: 12–14 minutes
Category: Long-Term Investing / ISA Strategy

Disclosure: I hold Nike shares in my ISA. This article explains my thinking and review process, not a recommendation to copy my decision. Financial information was checked on 15 October 2026. The $35 and $180 share prices used below are rounded comparison points, not live quotations or my personal purchase prices.

Introduction

Writing about investment principles is useful.

Applying them to a company you already own is more revealing.

It is relatively easy to say that investors should review their holdings, examine cash flow and avoid becoming attached to familiar brands.

It feels different when you open the accounts of a company in your own ISA and realise that its financial performance has weakened considerably.

That is where I found myself with Nike.

I originally wanted businesses with the characteristics of long-term compounders: strong economics, productive use of capital, cash generation and the ability to grow value per share over time.

Nike’s history and brand made it a company worth considering within that approach.

But a company’s history cannot do the work of its current results.

As I began reviewing my holdings more closely, Nike raised an uncomfortable question:

Am I still holding the type of business I intended to own?

Then a second question followed:

Even if the business is weaker, could the much lower price offer a more attractive investment from here?

Those questions are connected, but they are not interchangeable.

Following last week’s article, Value Is Not Just a Low Price, this feels like the right time to show how I am applying that distinction to my own portfolio.

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Why I Am Looking More Closely at My Holdings

My ISA has a structured buying process.

That helps me spread investment over time, manage allocation and reduce the temptation to react to every market movement.

But I have identified something that needed more structure: the ongoing review of the businesses themselves.

I had spent time deciding what deserved to enter the portfolio. I needed an equally deliberate process for checking whether those holdings continued to justify their place.

That is my responsibility.

A buying system can make execution more consistent. It cannot tell me, by itself, whether a company still possesses the qualities that originally attracted me.

I explain the wider approach in My Rules-Based ISA Compounder Strategy.

The purpose of this review is to strengthen that process.

It is also part of why I write Stocked & Shared. Documenting my decisions publicly encourages me to examine them more carefully.

Including the decisions that are uncomfortable.

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Three Questions That Need Separate Answers

With Nike, I found it useful to separate the review into three parts.

Question	What I am assessing
Is the business maintaining its quality?	Profitability, cash generation, returns on capital and competitive strength
Is the price attractive?	What I am paying for realistic future earnings and cash flow
Does it still fit my portfolio?	Whether the opportunity and uncertainty suit the role I intended it to play

A company can become cheaper while becoming weaker.

It can also become cheap enough to offer an interesting prospective return despite that weakness.

However, an interesting recovery opportunity may be quite different from a dependable long-term compounder.

That third question therefore matters.

I need to understand both what I own and what kind of investment it has become.

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First, the Business Has Weakened

Nike’s annual figures show why this review is necessary.

Measure	FY2024	FY2025	FY2026
Revenue	$51.36bn	$46.31bn	$46.40bn
Diluted earnings per share	$3.73	$2.16	$2.10
EBIT margin	12.7%	8.2%	8.3%

Nike also reported return on invested capital of 20.2% for FY2025 and 18.7% for FY2026. Its ROIC measure is not identical to ROCE, so I would not treat the two as interchangeable. These figures come from Nike’s FY2026 annual report.

The pattern deserves attention.

This is more than a share price becoming unpopular. The financial performance underneath it has changed.

A familiar name does not make those changes less important.

The earlier article, Why Quality Comes First in a Panic Recovery Setup, discussed why I examine the direction of the numbers alongside the latest reading.

That principle applies to companies already in my portfolio too.

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Cash Flow Makes the Review More Important

Using operating cash flow less additions to property, plant and equipment, I calculate free cash flow of approximately $6.62 billion in FY2024, $3.27 billion in FY2025 and $2.18 billion in FY2026.

Dividing by each year’s diluted weighted-average shares gives approximately $4.33, $2.20 and $1.47 per share. These are my calculations from the annual report, rather than a separately reported Nike FCF-per-share measure.

That is why I want cash flow in the review alongside earnings.

Profit can be affected by accounting adjustments. Cash generation can be affected by working-capital timing and investment spending.

Neither should be read in isolation.

I want to understand whether weaker cash generation is temporary, whether investment is likely to earn an adequate return, and whether the business can support its commitments through a difficult period.

The objective is to build an explanation, rather than select whichever measure looks most reassuring.

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The Question That Changed the Discussion

Having recognised the deterioration, I asked something that matters just as much:

If the price has fallen substantially too, am I buying more earnings and dividend entitlement for the same amount invested?

That does not dismiss the weaker business performance.

It brings valuation back into the decision.

Suppose a company once earned $6 per share and traded at $180.

Its P/E would be 30, and its earnings yield would be approximately 3.33%.

If earnings later fell to $2 and the price fell to $60, the P/E would still be 30. The earnings yield would still be approximately 3.33%.

Both price and earnings have fallen by two-thirds.

The company is weaker, but the amount paid for each dollar of earnings is unchanged.

That simple example explains why deteriorating earnings alone cannot settle the investment question.

I also need to consider the price.

Then I need to assess whether the earnings used in that calculation are sustainable.

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What the Same £1,000 Buys at Different Prices

I wanted to make this more tangible.

What would the same allocation buy at $180 per share compared with $35?

For this illustration, I assume:

• An investment of £1,000.
• A fixed exchange rate of £1 = $1.25, giving $1,250 to invest.
• Fractional shares, purely to make the comparison clean.
• The same $2.10 annual EPS applied to both share quantities.
• An illustrative annual dividend of $1.64, assuming four payments at $0.41.
• No dealing costs, currency charges or withholding taxes.

Nike declared a quarterly dividend of $0.41 in August 2026. Annualising that payment does not guarantee that four future payments will be made at the same rate.

Illustration	At $180 per share	At $35 per share
Initial investment	£1,000	£1,000
Shares acquired	6.94	35.71
Annual earnings attributable to those shares, expressed in pounds	£11.67	£60.00
Annual dividend before withholding taxes, expressed in pounds	£9.11	£46.86
Earnings yield on purchase cost	1.17%	6.00%
Illustrative gross dividend yield on purchase cost	0.91%	4.69%

The lower price buys approximately 5.14 times as many shares.

With the same per-share assumptions, it therefore buys approximately 5.14 times the earnings attribution and dividend entitlement.

But this table is not a comparison of the actual opportunities available at two historical dates.

It deliberately applies the same earnings and dividend assumptions to both prices. It shows the effect of price alone.

A proper historical comparison would also need the earnings, expectations, dividend and exchange rate relevant at each date.

That distinction matters.

The table supports the arithmetic behind my question. It does not prove that $35 represents fair value.

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Earnings Yield Is Not a Payment Into My Account

The earnings line needs explaining.

If a business earns $2.10 per share and I own 100 shares, I can attribute $210 of its reported annual profit to that holding.

That does not mean I receive $210 in cash.

The company decides how much to distribute and how much to retain. Retained money may fund investment, reduce debt or support other business needs.

The dividend is the cash payment, when declared and paid.

I also cannot add earnings yield and dividend yield together as though they were independent returns. Dividends are a distribution from the company’s resources, not an extra profit stream unrelated to earnings.

My eventual investment return depends on several things:

• The dividends received.
• Changes in the share price.
• Currency movements.
• Costs and applicable taxes.
• The period over which I own the shares.

Earnings yield helps me understand the price paid for reported profits. It is not a promised annual return.

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A Lower Entry Price Does Not Repair an Earlier Purchase

There is another boundary to the argument.

Someone who bought at $180 does not recover their loss simply because new money can buy more shares at $35.

The original holding has fallen in market value.

For example, ignoring dividends, $1,000 invested at $180 buys approximately 5.56 shares. At $35, those shares would be worth about $194.

That loss is real in the portfolio’s current value, whether or not it has been crystallised through a sale.

Buying additional shares changes the overall position and average cost. It does not reverse what happened to the earlier purchase.

However, the earlier purchase price should not become the sole basis for the next decision either.

At the same current share price, existing and new shareholders have the same prospective earnings and dividend entitlement per share.

The market does not offer an existing shareholder a different future because they originally paid more.

The useful question is what the capital still invested can reasonably achieve from here.

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The Latest Outlook Changes the Valuation

This is where I need to challenge the attractive-looking 6% earnings yield.

That calculation uses $2.10 of reported annual EPS.

In its 1 October 2026 release, Nike guided to FY2027 adjusted diluted EPS of $1.15–$1.35, excluding approximately $0.15 of restructuring expenses. It also expected a high-single-digit revenue decline.

At the illustrative $35 price:

Earnings basis	EPS	Approximate P/E	Approximate earnings yield
FY2026 reported earnings	$2.10	16.7	6.0%
FY2027 adjusted guidance: lower end	$1.15	30.4	3.3%
FY2027 adjusted guidance: upper end	$1.35	25.9	3.9%

These calculations use the same reference price, but different periods and earnings definitions.

They are not directly comparable measures of underlying performance. They demonstrate how much the valuation depends on which earnings figure is used.

There is another qualification: Nike’s FY2026 fourth-quarter EPS included a $0.52 benefit associated with expected tariff recovery. That benefit should not simply be assumed to recur. Removing it alone would not constitute a complete normalised-earnings calculation either.

This is why I cannot stop at the most flattering historical ratio.

The price may compensate for considerable weakness. Whether it compensates sufficiently depends on future earning power.

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The Dividend Is Part of the Picture

At an assumed annual rate of $1.64, a $35 reference price produces a gross dividend yield of approximately 4.69%.

That looks very different from the same dividend applied to a $180 purchase price.

But the payment has to be supported.

Comparing $1.64 with adjusted EPS guidance of $1.15–$1.35 implies a payout above those earnings.

That comparison does not establish that a cut will happen. It does mean I should avoid treating the illustrated income as assured.

Cash generation, available financial resources and the demands of the business all matter.

As a UK investor, the amount reaching my account may also differ from the gross dollar payment because of exchange rates and overseas withholding.

I want the dividend to support the investment case. I do not want an attractive-looking yield to distract me from its sustainability.

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Better Value and Better Compounding Are Different Claims

This was the most useful distinction in my thinking.

A company can offer a potentially attractive recovery return without currently demonstrating the dependable compounding characteristics I originally wanted.

Compounding through business growth depends partly on what management can achieve with retained capital.

If a company earns attractive returns and can reinvest at similar rates, that can support growth in future earnings and cash flow.

A recovery investment may depend more heavily on restoring lost profitability, improving operations or persuading investors to apply a different valuation.

Those routes can produce returns.

They also carry different uncertainty.

For Nike, I am therefore separating two beliefs:

The much lower price may offer a more attractive opportunity.

The business still needs to demonstrate what it can sustainably earn.

The first does not establish the second.

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The Awkward Part: My ISA Framework Excludes Turnarounds

I need to acknowledge something directly.

My published ISA framework says that I want quality businesses and excludes turnarounds.

If I now describe Nike primarily as a recovery opportunity, I cannot pretend there is no tension between that description and the original framework.

That would undermine the accountability the blog is meant to create.

My present decision is to hold and continue purchasing within my planned allocation. That is a judgement I am making about value and recovery potential.

It is not evidence that Nike remains an unchanged example of the original compounder criteria.

I need to record why I believe the uncertainty is acceptable and what would cause me to reconsider.

Otherwise, a company could quietly move from “dependable compounder” to “recovery hope” while the purchase schedule continued untouched.

That is precisely the drift I want the review process to expose.

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What My Buying Schedule Helps With

My structured purchase schedule helps me avoid putting all my planned capital to work at one price.

It also reduces the pressure to decide whether this week is the perfect moment to invest.

When prices fall, a given allocation can buy more shares.

That can improve the result if the underlying business subsequently stabilises and grows.

But the schedule cannot protect me from continuing deterioration.

A falling company can absorb repeated contributions while becoming less valuable.

I therefore need two disciplines working together:

Discipline	Its job
Buying discipline	Manage the timing and allocation of contributions
Holding discipline	Assess whether the business still deserves capital

Neither replaces the other.

My plan should help me execute a considered decision consistently. It should not make the decision immune from review.

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A Recognisable Brand Is Not Enough

During this review, I thought about businesses such as WH Smith, Marks & Spencer and Vodafone.

I am not suggesting they share one identical history, or that Nike will follow any particular company’s path.

The broader question they prompted was whether familiarity can make investors slow to recognise changing economics.

A company’s name may remain recognisable long after its investment characteristics have altered.

That is why brand strength needs to appear in the numbers.

I want to see whether customers still value the products, whether pricing supports profitability, and whether the business generates attractive returns after the costs required to compete.

Recognition is useful. It is not a substitute for evidence.

Nor have I proved that Nike avoids the risk of lasting deterioration simply because its price is lower.

I have identified a reason to investigate the valuation more carefully.

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What I Will Monitor From Here

My review needs to produce more than a statement that I will “keep an eye on it”.

I want a consistent record.

Earnings per share

I will track reported diluted EPS alongside adjusted figures and the reasons for adjustments.

The aim is to understand whether sustainable earning power is stabilising.

Free cash flow per share

I will examine cash generation after capital expenditure, including the effects of working capital.

I want to understand whether improvements are repeatable.

Returns on capital

I will use consistent definitions and examine the trend.

Changes in profit and the capital base both need explanation.

Margins and demand

I want to understand whether profitability reflects stronger customer demand and product economics, rather than relying entirely on cost reductions.

Balance-sheet commitments

Debt maturities, leases and other demands on cash belong in the assessment.

Shareholder distributions

I will compare dividends and buybacks with earnings, cash generation and the company’s investment needs.

The important point is the pattern across these measures.

One improved quarter would be encouraging. A consistent improvement across several reporting periods would be more persuasive.

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What Would Challenge My Present View?

Continuing to hold should come with a willingness to change my mind.

I would become more concerned if:

• Earnings expectations kept falling without a credible stabilisation case.
• Weak cash generation persisted beyond plausible timing effects.
• Financial obligations reduced the room available for recovery.
• Customer demand or pricing suggested lasting competitive damage.
• Shareholder payments depended increasingly on weakening financial resources.
• My valuation case required progressively more optimistic assumptions.

A review trigger would not automatically mean selling.

It would mean reopening the investment case properly.

I also need to consider opportunity cost. Capital remaining in Nike is capital unavailable for another holding.

The comparison should be between realistic future opportunities, rather than between today’s price and a former high.

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Where I Stand Today

My current decision is to retain Nike and continue my planned purchases within the allocation I have chosen.

The reasoning is that a lower price can improve prospective value even when the business has weakened.

But this review has made that decision more demanding.

The historical earnings comparison is a starting point. The forward outlook, cash generation and sustainability of distributions need equal attention.

I am also recognising that the holding now involves more recovery uncertainty than the original compounder description suggests.

I do not want to dismiss that uncertainty.

I want to understand it, record it and judge subsequent results against it.

That is my decision for my portfolio. Another investor could reasonably conclude that the uncertainty does not fit their objectives.

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The Link With My Rotork Decision

In Why Selling One of My “Never Sell” Stocks Was the Right Choice, I described a different capital-allocation question.

The circumstances were different, but the useful question is similar:

From here, does this holding still justify the capital committed to it?

That can lead to different decisions for different companies.

Sometimes selling is disciplined.

Sometimes continuing to hold through discomfort is disciplined.

The action alone does not demonstrate the quality of the decision. The reasoning, evidence and willingness to review it matter.

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Final Thoughts

Nike has helped me identify a gap in my process.

I had a structured approach to buying. I needed a more deliberate approach to reviewing what I continued to own.

The exercise has also sharpened an important distinction:

A weaker business can become a more interesting investment at a sufficiently lower price.

But a lower price cannot establish that future earnings are sustainable, that the dividend will continue, or that the company still fits its original portfolio role.

Those require further evidence.

For now, I am holding and continuing my planned purchases while strengthening the review behind that decision.

I will apply the same scrutiny across the rest of my portfolio.

That is part of the purpose of Stocked & Shared: documenting decisions clearly enough that I can return to them, test them against subsequent evidence and recognise when my thinking needs to change.

Next in the series: Do Not Catch a Falling Knife: Why I Wait for Market Structure.

We will return to Panic Recovery trading and examine the evidence I want before a watchlist candidate becomes a possible trade—a separate process from managing my long-term ISA holdings.

Related Reading

• My Rules-Based ISA Compounder Strategy
• Why Quality Comes First in a Panic Recovery Setup
• Why Selling One of My “Never Sell” Stocks Was the Right Choice
• The Panic Recovery Strategy: Buying Quality When the Market Overreacts

Explore the Panic Recovery Framework

For the separate trading framework discussed elsewhere in this series, you can get the free Panic Recovery Playbook and six-part video course here.

This article is for educational and informational purposes only. I hold Nike shares and may buy or sell in future. It is not personal financial advice or a recommendation to invest. Comparison prices and exchange rates are illustrative. Earnings yields are not guaranteed investment returns, dividends can change, and investments can fall as well as rise.