NKE, Nike Inc.

Will it survive?

• Can it pay its interest? —
  No meaningful interest burden
  Little or no interest expense reported
  What this means

  Little or no interest expense reported, the business isn't leaning on lenders to operate.

• How heavy is the debt, net of cash? +$617M
  Net cash
  Cash $7.6B + ST investments $996M − debt $7.9B
  What this means

  Cash and short-term investments exceed every dollar of debt by $617M, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? 100d
  Long (60+ days)
  DSO 47 + DIO 103 − DPO 50 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital 33%
  Very high (≥25%) through the cycle
  10-yr median, range 20%–50%; 20% latest = NOPAT $3.1B ÷ invested capital $15.2B
  Industry peers: median 10%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 20% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 9%
  Solid through the cycle
  10-yr median margin, range 5%–13%; latest $2.2B = operating cash $2.9B − maintenance capex $684M
  Industry peers: median 8%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 5% of revenue this year, a 9% median across 10 years. Treating stock comp as the real expense it is (less $715M of SBC) leaves $1.5B.

• Are earnings backed by cash? 0.92×
  Mostly cash-backed
  Cash from ops $2.9B ÷ net income $3.1B
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 117%
  Returned more than it generated
  Dividends + buybacks $2.6B ÷ Owner Earnings $2.2B
  What this means

  The company returned more than it generated: against $2.2B of Owner Earnings, $2.6B (117%) went back to shareholders, $2.4B dividends, $146M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. But the buybacks barely exceed stock issued to employees ($715M SBC), net of dilution, little was truly returned. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 0.92×
  Maintaining
  Capex $684M ÷ depreciation $747M
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 4 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

• Adequate size Pass
  Revenue ≥ $2B · $46.4B
  What this means

  Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.

• Strong liquidity Near
  Current ratio ≥ 2× · 1.96×
  What this means

  Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.

• Conservative debt Pass
  Debt ≤ working capital · $7.9B vs $12.1B WC
  What this means

  Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.

• Earnings stability Pass
  A profit every year (10-yr record) · no losses
  What this means

  Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.

• Dividend record Pass
  Uninterrupted dividends · paid every year (10)
  What this means

  An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.

• Earnings growth Near
  Earnings +33% over the record · +18%
  What this means

  At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.

• Moderate price —
  P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
  What this means

  Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $2.71/share (latest year $2.10), the averaged base the calculator's gate runs on, and book value is $10.05/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2017–2026

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 10 of 10
  What this means

  Never lost money over the record, the earnings stability Graham insisted on.

• Return on capital ≥ 15% 10 of 10 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 13% → 10% (3-yr avg ends)

  In the filing’s words The filing attributes gains to higher prices, but the margin in the record has not followed — the claim outruns the result here.

  What this means

  Through the cycle the operating margin slipped — about 13% early to 10% lately, median 12% — competition or costs are biting in.

• Reinvestment, incremental ROIC 12%
  What this means

  Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.

• Owner earnings growth −3%/yr
  What this means

  Owner earnings shrank about 3% a year over the record.

• Worst year 2020 · 7.7% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.

• Share count −1.5%/yr
  What this means

  The share count is shrinking, buybacks are quietly growing your slice of the business.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.