Nike Stock: Is It a Buy After Its Recent Earnings Beat?

**Nike **(NKE 1.70%) has been struggling in recent years to grow its business, but there's no denying the brand remains highly recognizable and is iconic in the athletic world. And when a company has strong assets to work with, there's the potential for a turnaround effort to be successful and pay off.

The apparel company remains in the midst of a turnaround, and with it beating expectations in its most recent quarterly results, there may be a glimmer of hope that the business is on the right track. Is Nike's stock worth buying right now?

Image source: Getty Images.

Nike beat expectations, but the results remain underwhelming

On June 30, Nike reported its fourth-quarter results for the period ending May 31. While revenue for the period totaled $10.97 billion and beat analyst expectations of $10.86 billion, that still represented a year-over-year decline of 1%, reflecting a low bar for the company. Nike benefited from tariff refunds during the quarter, which enabled its bottom line to jump from $211 million a year ago to nearly $1.1 billion for the most recent period. Even on an adjusted basis, however, the company's per-share profit of 20 cents was better than expectations of 13 cents.

The earnings results have given the apparel stock a bit of a boost, but CEO Elliott Hill, who took over nearly two years ago, admits that the company still faces challenges in its turnaround effort, particularly in Greater China, where sales declined by 12%. "We know we're not living up to our full potential."

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NYSE: NKE

Nike

Today's Change

(-1.70%) $-0.75

Current Price

$43.34

Key Data Points

Market Cap

$64BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.Market cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day's Range

$41.84 - $44.11

52wk Range

$40.00 - $80.17

Volume

114.7K

Avg Vol

24.5M

Gross Margin

44.06%

Dividend Yield

3.76%

Should investors trust the process and buy Nike's stock on weakness?

If Hill successfully turns the business around and gets Nike back to growth, that would likely result in significant gains for the beaten-down stock, which has fallen more than 70% over the past five years. But with there being little, if any, real progress to show since Hill took over, it's clear there are significant challenges for the company and questions about its future.

The stock may appear cheap, but not when measured by future earnings projections; it's trading at a forward price-to-earnings multiple of 23, based on analysts' expectations for the year ahead. That's not low at all, given the uncertainty with Nike's stock right now. There's still a ton of risk here, and Nike's stock may only be suitable for investors who are comfortable with that and who are willing to potentially hang on for years, in the hopes that the turnaround will be successful, which is by no means a sure thing.