$NKE: Just Do It? PULSE Framework

With Nike's stock down 15% after earnings, is it worth your time? Let's find out using the PULSE framework.

Every Tuesday I apply the PULSE framework to a new stock to illustrate the process. The framework combines 5 fundamental signals across all 3 financial statements to quickly place a stock into one of 3 categories:

• Not interesting

• Attractive company at a high price that maybe interesting later

• Attractive company at an interesting price

This isn't a stock recommendation system. It's a triage tool designed to answer one question before you spend hours on research: is this worth a deeper look now? If you want to do this yourself for any stock, you can get the PULSE template here.

Let’s get to Nike ($NKE) and put it through the framework to see if it's worth more research.

The “P” stands for Economic Profit, and here is what Nike’s looks like:

• The chart is attractive - it has positive, rising Economic Profits over a long period of time

• Note that the last few years Economic Profits are down from their peak, so this is a moderate cause for concern

The “U” stands for Underlying FCF, and here is what Nike’s looks like:

• Underlying FCF is attractive, positive and rising over time

• The conversion to Net Income is good at 80%+

• Just like Economic Profits, 2025 FCF was down from prior peaks which is something to note

The “L” stands for Financial Leverage, here is what Nike’s looks like:

Leverage looks modest, suggesting the balance sheet is in good shape.

The “S” stands for Smoothed Underlying FCF yield, here is what Nike’s looks like:

Note that the goal is to be approximately correct, not precise. We are screening here to decide if the stock is worth doing more work on, so it’s OK to be a bit off.

For Nike, the FCF yield is interesting, especially in the context of high-quality fundamentals and above average long-term growth.

The “E” stands for EV Cap Rate, which for Nike is:

The EV Cap Rate is a nice complement to the Smoothed FCF yield for two reasons:

1. The EV Cap Rate is based on the more recent last 12 month profits

2. It looks at the whole capital structure, not just the equity

For Nike, the 3.4% EV Cap Rate is not interesting on its own. However, we should remember to look at it in the context of 2025 profits being down substantially from prior peak.

Putting It All Together

Let’s put all 5 PULSE signals together for Nike:

• Economic Profits: Excellent

• Underlying FCF: Excellent

• Leverage: Good

• Smoothed Underlying FCF Yield: Interesting

• EV Cap Rate: Not Interesting

Conclusion: Based on the PULSE framework, Nike is interesting and deserves more research.

Do you want to get the PULSE template so that you can save many hours screening stocks and focus on the highest-potential opportunities? You can get it here.

Every Friday I plan to publish a video post going through 3-4 stocks with the PULSE framework. The posts will be free, but only paid subscribers can request which stocks I look at. If you are a paid subscriber, please leave a comment with your request, post it in the PULSE chat or send me a DM.

Please support my work by restacking this post if you found it useful.

Disclaimer: Not financial advice, for educational purposes only.

About the author

Gary Mishuris, CFA is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm that seeks to apply its intrinsic value approach to safely compound capital over the long-term. He also teaches the Value Investing Seminar at the F.W. Olin Graduate School of Business.