Nike (NKE -4.26%) stock was a monster winner in the five years leading up to its peak in November 2021, soaring by 255% during that time frame. But it has been wildly disappointing since then as softer demand hurt its financial performance, and it now trades about 58% below that record high.

However, investors who can look past the near-term headwinds at the bigger picture will see some traits to be optimistic about. Here are three reasons to buy this consumer discretionary stock like there's no tomorrow.

1. Nike has unmatched brand strength

Nike has a wide economic moat that comes from its powerful brand. No business has comparable mindshare in the sports apparel and footwear market. This provides it with strong pricing power, which has been reflected in its 44.6% average gross margin over the past 10 years.

The brand's strength is also obvious when you look at Nike's international appeal. In its fiscal 2024, which ended May 31, 58% of its revenue was derived outside North America. This is truly a global outfitter.

Credit goes to Nike's unrivaled competency in the marketing department. Inspiring advertisements, as well as high-profile endorsements from top athletes and contracts with major sports leagues, have kept a spotlight shining on it.

In its fiscal 2025 Q2, which ended Nov. 30, Nike spent $1.1 billion on "demand creation expenses" (i.e., marketing). None of its rivals can afford to spend that much on such an important expense. Nike's scale -- exemplified by the $49 billion in trailing 12-month sales it generated -- is a key advantage.

Yet competition remains fierce in the apparel and footwear industries. Nike will need to stay on top of its game if it's going to drive excitement and demand from consumers. The company's long-standing dominance definitely demonstrates that it's still held in high regard.

2. Management has the right priorities

All businesses encounter setbacks. The great ones are able to figure out what their specific problems are, identify solutions, and then get back on track. What emerges from the other side of such turmoil can be a much better company. Perhaps Nike is on its way to just such a transformation.

New CEO Elliott Hill is another reason investors should buy the stock. Leadership is critical when sizing up any investment opportunity. In my opinion, so far, he's doing the right things to improve Nike's situation.

Hill understands how important it is to have strong distribution partners, something the previous leadership team might not have appreciated. Hill wants to build back the trust of wholesale accounts and once again develop Nike's presence in brick-and-mortar retailers.

Product innovation is another area getting a lot of attention. In recent years, Nike leaned too heavily on fashion-forward styles instead of focusing on sports-centric apparel and footwear. "Our clear priority is to return sport to the center of everything we do," Hill said in the latest earnings release.

3. Shares are on the discount rack

The S&P 500 and the Nasdaq Composite have been on incredible runs in the past couple of years, and both benchmarks are trading in record territory. That makes it more difficult to find great deals in the stock market.

Here's where Nike stands out. Its valuation is at a bargain level today. Specifically, it trades at a price-to-earnings ratio (P/E) of 23.7 -- near its cheapest level by that metric in the past decade.

Investors' patience will likely be tested. Nike's turnaround will take time, as its revenue dropped by 0.3% in fiscal 2024 and analysts project an 11% decline in fiscal 2025. Because of this, earnings are under pressure, too. But the combination of the brand's strength, the new CEO's sharp focus, and that cheap valuation adds up to a compelling thesis for buying Nike stock now.