Why On Holding Stock Is Back in Focus After Revenue Surprise

On Holding (ONON) moved higher after reporting revenue that surpassed market expectations, a development that puts fresh attention on how its athletic footwear and performance apparel business is translating into shareholder outcomes.

For investors following the consumer and retail sector, the latest report offers a new data point on On Holding’s ability to convert brand traction in running, outdoor and all day performance products into sales across wholesale and direct-to-consumer channels.

At a share price of $36.83, On Holding has seen a 3.57% 1-day share price return and an 11.50% 90-day share price return. The share price is down 21.55% year to date and the 1-year total shareholder return is down 32.19%, while the 3-year total shareholder return is up 15.82%. This suggests recent momentum has improved after a tougher stretch for longer term holders.

If this revenue surprise has you thinking about where else growth stories might emerge, it could be worth scanning opportunities in 20 top founder-led companies

With On Holding trading at $36.83, alongside an indicated intrinsic discount and a sizeable gap to analyst targets, the key question is whether the stock still offers mispriced growth or if the recent revenue surprise is already fully reflected.

Most Popular Narrative: 29.8% Undervalued

The most followed narrative on On Holding sees a fair value of $52.49, which sits well above the recent $36.83 close. It hinges heavily on how the business is scaling higher margin channels.

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.

Curious what kind of revenue path, margin lift and end point earnings this narrative needs to reach that fair value? The assumptions behind it are far from conservative, and the implied future earnings multiple is higher than many consumer brands. The full story spells out how growth, profitability and valuation are expected to line up.

Result: Fair Value of $52.49 (UNDERVALUED)

However, this hinges on On Holding sustaining premium pricing and expansion plans, and any slowdown in key regions or channels could quickly challenge that underpriced growth story.

Another View on On Holding’s Valuation

The earlier narrative frames On Holding as about 29.8% undervalued using future earnings and price target assumptions. Looking at today’s P/E multiple, the picture is less generous. The stock trades at 39.1x earnings, compared with a fair ratio of 29.3x, peer average of 23.6x and US Luxury at 21.3x. That gap implies investors are already paying a premium for growth and brand strength, which raises the question of how much room is left if execution or sentiment cools.

For a closer look at how this premium compares and where the fair ratio could move over time, have a look at See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of optimism and caution around On Holding has you thinking, now is a good time to review the numbers yourself and test the assumptions behind them, then weigh those views against the 3 key rewards

Looking for more investment ideas beyond On Holding?

If On Holding has sharpened your focus on where to put fresh capital, now is the moment to broaden your watchlist using targeted stock ideas.

• Hunt for mispriced quality by checking stocks highlighted in the 42 high quality undervalued stocks that pair robust fundamentals with attractive valuations.
• Prioritize resilience and sleep better at night by reviewing companies in the 75 resilient stocks with low risk scores with steadier risk profiles.
• Spot future standouts early by scanning the screener containing 18 high quality undiscovered gems before they gain wider attention.

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.