In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)
Weighted Average Cost of Capital (WACC)
FCFF Growth Rate (g)

Nike Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Year	Value	FCFF_t or Terminal value (TV_t)	Calculation	Present value at 13.42%
0¹	FCFF₀	6,941
1	FCFF₁	8,109	= 6,941 × (1 + 16.82%)	7,149
2	FCFF₂	9,270	= 8,109 × (1 + 14.32%)	7,206
3	FCFF₃	10,366	= 9,270 × (1 + 11.82%)	7,105
4	FCFF₄	11,332	= 10,366 × (1 + 9.32%)	6,848
5	FCFF₅	12,106	= 11,332 × (1 + 6.82%)	6,450
5	Terminal value (TV₅)	196,059	= 12,106 × (1 + 6.82%) ÷ (13.42% – 6.82%)	104,465
Intrinsic value of Nike Inc. capital				139,224
Less: Short-term borrowings and long-term debt (fair value)				7,637
Intrinsic value of Nike Inc. common stock				131,587

Intrinsic value of Nike Inc. common stock (per share)				$88.96
Current share price				$70.84

Based on: 10-K (reporting date: 2024-05-31).

¹ See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Nike Inc., cost of capital

	Value¹	Weight	Required rate of return²	Calculation
Equity (fair value)	104,781	0.93	14.21%
Short-term borrowings and long-term debt (fair value)	7,637	0.07	2.52%	= 3.05% × (1 – 17.42%)

Based on: 10-K (reporting date: 2024-05-31).

¹ US$ in millions

Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,479,126,887 × $70.84
= $104,781,348,675.08

Short-term borrowings and long-term debt (fair value). See details »

² Required rate of return on equity is estimated by using CAPM. See details »

Required rate of return on debt. See details »

Required rate of return on debt is after tax.

Estimated (average) effective income tax rate
= (14.90% + 18.20% + 9.10% + 17.70% + 20.20% + 16.10%) ÷ 6
= 17.42%

WACC = 13.42%

FCFF growth rate (g) implied by PRAT model

Nike Inc., PRAT model

	Average	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019
Selected Financial Data (US$ in millions)
Interest expense		269)	291)	299)	296)	151)	131)
Net income		5,700)	5,070)	6,046)	5,727)	2,539)	4,029)

Effective income tax rate (EITR)¹		14.90%	18.20%	9.10%	17.70%	20.20%	16.10%

Interest expense, after tax²		229)	238)	272)	244)	120)	110)
Add: Dividends on common stock		2,203)	2,059)	1,886)	1,692)	1,491)	1,360)
Interest expense (after tax) and dividends		2,432)	2,297)	2,158)	1,936)	1,611)	1,470)

EBIT(1 – EITR)³		5,929)	5,308)	6,318)	5,971)	2,659)	4,139)

Current portion of long-term debt		1,000)	—)	500)	—)	3)	6)
Notes payable		6)	6)	10)	2)	248)	9)
Long-term debt, excluding current portion		7,903)	8,927)	8,920)	9,413)	9,406)	3,464)
Shareholders’ equity		14,430)	14,004)	15,281)	12,767)	8,055)	9,040)
Total capital		23,339)	22,937)	24,711)	22,182)	17,712)	12,519)
Financial Ratios
Retention rate (RR)⁴		0.59	0.57	0.66	0.68	0.39	0.64
Return on invested capital (ROIC)⁵		25.40%	23.14%	25.57%	26.92%	15.02%	33.06%
Averages
RR	0.63
ROIC	26.82%

FCFF growth rate (g)⁶	16.82%

Based on: 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31).

¹ See details »

2024 Calculations

² Interest expense, after tax = Interest expense × (1 – EITR)
= 269 × (1 – 14.90%)
= 229

³ EBIT(1 – EITR) = Net income + Interest expense, after tax
= 5,700 + 229
= 5,929

⁴ RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [5,929 – 2,432] ÷ 5,929
= 0.59

⁵ ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 5,929 ÷ 23,339
= 25.40%

⁶ g = RR × ROIC
= 0.63 × 26.82%
= 16.82%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value₀ × WACC – FCFF₀) ÷ (Total capital, fair value₀ + FCFF₀)
= 100 × (112,418 × 13.42% – 6,941) ÷ (112,418 + 6,941)
= 6.82%

where:

Total capital, fair value₀ = current fair value of Nike Inc. debt and equity (US$ in millions)
FCFF₀ = the last year Nike Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Nike Inc. capital

FCFF growth rate (g) forecast

Nike Inc., H-model

Year	Value	g_t
1	g₁	16.82%
2	g₂	14.32%
3	g₃	11.82%
4	g₄	9.32%
5 and thereafter	g₅	6.82%

where:
g₁ is implied by PRAT model
g₅ is implied by single-stage model
g₂, g₃ and g₄ are calculated using linear interpoltion between g₁ and g₅

Calculations

g₂ = g₁ + (g₅ – g₁) × (2 – 1) ÷ (5 – 1)
= 16.82% + (6.82% – 16.82%) × (2 – 1) ÷ (5 – 1)
= 14.32%

g₃ = g₁ + (g₅ – g₁) × (3 – 1) ÷ (5 – 1)
= 16.82% + (6.82% – 16.82%) × (3 – 1) ÷ (5 – 1)
= 11.82%

g₄ = g₁ + (g₅ – g₁) × (4 – 1) ÷ (5 – 1)
= 16.82% + (6.82% – 16.82%) × (4 – 1) ÷ (5 – 1)
= 9.32%

Nike Inc. (NYSE:NKE)

Present Value of Free Cash Flow to the Firm (FCFF)

Intrinsic Stock Value (Valuation Summary)

Weighted Average Cost of Capital (WACC)

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

FCFF growth rate (g) implied by single-stage model

FCFF growth rate (g) forecast