On Holding has performed well since its low of $15.6 was reached in 2022. The stock has now risen to $56 and its market capitalization is over $18 Billion. This makes it the fastest growing brand in the apparel and footwear industries. ON is doing better than popular brands such as Nike, Adidas and Under Armour. Is ON a wise investment?
The footwear and clothing industry is being disrupted by On
On Holding, one of the most rapidly growing companies in the clothing and footwear industry has seen its revenues soar from $276 millions in 2019 to more than $2.55 billion over the past twelve months.
The brand is growing despite the struggles of its competitors Nike and Under Armor. It took advantage, for example, of Nike’s decision not to be present in the top retail stores to increase its market share.
On Holding reported a 32.3% increase in revenue for the third quarter, to CHF 635.8 millions. The growth in sales was due mainly to the direct-to consumer channel which accounts for 38% of total sales.
On also has achieved more as its margins are now nearer 61%. This is a huge number when you consider that Nike only makes 44%. Under Armour’s gross margin is 47%, while Adidas’s is 49%.
On Holdings’ higher margin is due in part to its continued focus on DTC, and the lack of discounting as done by other companies.
Its success is due to the company’s continued demand. This was especially true after the Paris Olympics, and the partnerships it has made, such as with Zendaya. The company’s guidance was boosted because it expected its net sales to grow by about 32 percent, which is an impressive number for a business that’s been around since 2010.
Value and Earnings ahead
On Holding’s financial results will come out in March and be the next major catalyst for its stock.
Analysts anticipate that revenue for the fourth quarter will rise to $593 millions, a 33% increase from the year before.
This year, the revenue forecast is $2.3 billion and then $2.95 this coming year. This implies annualized growth rates of 28,5% and 27,9% respectively.
On Holding is also expected to become profitable in 2023, as the EPS will move from $0.35 to $0.8.
On Holding’s market capitalization of more than $18 billion is deemed by many investors to be overvalued. Under Armour is another major brand within the industry valued at more than $3 billion.
Nike’s forward P/E ratio is 33.3 while On Holding has an 83.3 multiple. On Holding’s revenue and profit growth can justify this valuation.
On Holding is doing well, but can ONON still have upside potential?
On Holding Stock Price Analysis
TradingView: ON Stock
On the daily chart, the ON share price is in an uptrend. The daily chart shows that the ON stock price has been in a strong uptrend for a few months.
On Holding has tested the lower edge of the ascending channel, and it is now above the moving average 50 days. The stock is therefore likely to bounce back. Next, we will be watching the high point of 64 dollars. The bullish outlook will be invalidated if the stock drops below $54.55, the lower edge of the channel.
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