Because of how well it represents the performance of the overall stock market, investors seem to always have their eyes on the S&P 500 index. This benchmark contains some of the largest and most profitable companies in the U.S. Despite its solid long-term track record, it has been under pressure in the past couple months due to economic worries.

Some businesses in the S&P 500 have fared a lot worse. In fact, there's a consumer discretionary stock that's a tear-jerking 68% below its record (as of April 22). Continue reading to learn more about this company, and then can decide if it's time to buy shares and hold them for the next 20 years.

Fixing strategic blunders

If a stock is down nearly 70% from its peak, there is definitely something fundamentally going wrong with the business. This is the case with Nike (NKE -1.45%).

Nike's revenue has dipped on a year-over-year basis in four straight fiscal quarters. And for the current fiscal quarter, management expects a mid-teens decline.

Under previous CEO John Donahoe, Nike made some costly mistakes that it's still dealing with. There was a lack of product innovation, which failed to drive customer interest. Nike leaned heavily on classic footwear franchises, like the Air Jordan 1, Dunk, and Air Force 1. Now, however, they aren't as popular. The company has to implement excessive discounts and promotional activity to get rid of inventory.

Distribution is another challenge. Nike moved away from some key retail partners during the pandemic, instead emphasizing its direct-to-consumer channels. However, it's evident that consumers still favor going to physical stores. Now, Nike is trying to win back the trust of wholesale accounts.

Elliott Hill, a longtime Nike veteran who retired in 2020, was hired as CEO last October. He understands the business at a deeper level than almost anyone, which might make him the right man to fix Nike's current situation. His top priority is to bring sport back to everything Nike does.

Still dominating the industry

All businesses, no matter how successful they've been at certain points, go through difficult periods. This is the nature of capitalism. And it's especially true in extremely competitive industries like the one Nike operates in. But there are still reasons to appreciate this company.

One of Nike's key assets is its brand. Forget the sportswear market, and think about the economy overall. There are very few brands that hold as much weight as Nike in the eyes of consumers. Credit goes to having an intense focus on marketing, particularly to convey an emotional response from consumers who want to associate with winning.

What's more, Nike's partnerships with major sports leagues, as well as the endorsements it has in place with top athletes, give it unmatched visibility. This is difficult for a competitor to replicate.

Sales might be under pressure. But don't forget that Nike still generated $5.3 billion in footwear sales in Q3. Despite all the attention smaller and faster-growing rivals get, that's a massive figure that puts it well ahead of peers. There's no doubt that Nike still reigns supreme.

High risk, high reward

By understanding its dominant position in the industry, investors might give Nike the benefit of the doubt. Maybe there's a good chance the company can start introducing exciting products, win back customers, and grow revenue and earnings.

But nothing is guaranteed. And to make matters worse, Nike must now deal with the uncertainty surrounding tariffs, which could substantially increase its costs.

To be clear, this is a high-risk/high-reward stock. Nike's price-to-earnings ratio, a widely used valuation metric, is near a 10-year low. But it's really anyone's guess when things will turn around. Investors willing to take on a huge risk in the hopes of generating a strong return might find the current setup too hard to ignore.

For more risk-averse market participants, a better idea is to wait until Nike reveals financial improvements before buying shares.