On Holding (ONON) is in focus after its shift from a pure running label to a premium lifestyle brand, supported by new cushioning technologies and recent quarterly results that showed higher revenue and wider margins.

Despite the strong Q1 revenue and margin figures, On Holding’s share price has been under pressure, with the 30 day share price return down 11.73% and the year to date share price return down 25.15%. Over a longer horizon, the 3 year total shareholder return of 12.27% contrasts with the 1 year total shareholder return, which is down 33.02%. This suggests that recent momentum has cooled even as the underlying business continues to evolve.

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With On Holding’s share price under pressure despite revenue and margin progress, the key question is whether current levels reflect an attractive discount to its future earnings power or if the market is already pricing in that growth.

Most Popular Narrative: 33.1% Undervalued

The most followed narrative currently values On Holding at $52.49 per share, compared with the last close of $35.14. This frames the stock as materially undervalued and puts the focus on what has to go right in the business to close that gap.

The acceleration in DTC (Direct-to-Consumer) and e-commerce channels, with DTC reaching new highs (41.1% of sales in Q2 and up 54% YoY), gives On more control over brand, pricing, and customer data while increasing gross and EBITDA margins, an operational catalyst likely to further expand profitability as DTC continues its mix shift.

Want to see why this fair value sits well above today's On Holding share price? The narrative leans on faster earnings growth, richer margins and a premium profit multiple that assumes the brand keeps scaling efficiently. Curious which specific revenue and earnings paths support that view and how sensitive the valuation is to small tweaks in those assumptions? The full story joins those pieces together.

Result: Fair Value of $52.49 (UNDERVALUED)

However, On Holding still carries key risks, including heavy reliance on premium pricing and aggressive international expansion. These factors could pressure margins if demand or regional growth slows.

Another View on On Holding’s Valuation

The earlier fair value for On Holding came from a detailed cash flow based model that suggested the stock is undervalued, with shares trading about 33.1% below that estimate of future cash flow value at $52.54. Yet the market is currently putting a much richer 37.6x P/E on the stock compared with 22.6x for the US Luxury industry, 25.5x for peers and a fair ratio of 27.8x that the market could move towards. That gap points to real valuation risk if sentiment cools. Which signal do you put more weight on: the cash flows or the earnings multiple?

Next Steps

Given the mixed sentiment around On Holding, it may be useful to move quickly and test the assumptions against the numbers yourself to see what stands out. To see what investors are currently optimistic about in the story, start with the 3 key rewards.

Looking for more investment ideas beyond On Holding?

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• Target potential mispricings by scanning for quality companies trading below their estimated worth through the 44 high quality undervalued stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.