Even the best businesses go through difficult times and this can create buying opportunities for long-term investors. This is something I look to take advantage of in my Stocks and Shares ISA.

Nike (NYSE:NKE) is a good example of this – it’s a quality company, but the stock is down 52% from its 2021 highs. So should I be looking to buy it?

A company in transition

The last year has been a real struggle for Nike – the company has been losing market share to its rivals and its revenues are declining. And there are a couple of reasons for this. 

One is the decision to boost to e-commerce and exit some wholesale stockists. Another is an increased focus on limited edition collectible lines instead of innovation that will affect its ordinary products too.

Both of these moves worked well during the Covid-19 pandemic, but neither has been successful since. As a result, the stock has fallen 52% from its 2021 high. 

Nike is making moves to turn things around, though. Most notably, it is in the process of changing its CEO from e-commerce-focused John Donahoe to company veteran Elliott Hill. 

A quality business

As part of this, Nike has withdrawn its financial guidance for the next 12 months and cancelled the investor day that was due next month. The share price has unsurprisingly fallen another 7%.

I think there’s a lot to like about the underlying business though. The most obvious is its brand, which is one of the most recognisable in the world. 

This might not seem important, but it shows up in the company’s income statement. Aside from 2020, Nike has achieved operating margins in excess of 10% each year over the last decade.

Nike vs. Adidas operating margin 2014-24

Created at TradingView

This compares favourably with Adidas, where operating profits have been a much lower percentage of revenues. And this illustrates how important Nike’s brand power is. 

A value opportunity?

At a price-to-earnings (P/E) ratio of 24 Nike shares don’t look like an obvious bargain. But investors should note that this is actually relatively low compared to the recent past.

Nike P/E ratio 2014-24

Created at TradingView

For most of the last 10 years, Nike stock has been trading at a much higher multiple. So in terms of valuation, right now actually looks like an unusually good opportunity to me.

The macroeconomic environment is also starting to improve. Things started going wrong for Nike when US interest rates began rising, causing demand for pricey limited edition trainers to decline.

But this is starting to reverse. With the Federal Reserve beginning to cut interest rates, it’s possible the company might see a recovery in demand for its higher-margin collectible lines. 

Should I buy the stock?

I think there’s a lot to like about Nike shares. The stock trades at an unusually low valuation, the macroeconomic situation is improving, and the new CEO is focused on its core asset.

It’s definitely on the list of stocks I’m going to consider buying this month. And the latest drop in the share price might just make the opportunity too good to ignore.