On Holding AG (NYSE: ONON) has
emerged as a standout performer in the athletic footwear and apparel industry,
demonstrating remarkable growth and resilience. With its innovative products
and strategic market positioning, the company has captured the attention of
investors and consumers alike. The recent Q1 2025 earnings report underscores
On Holding's robust financial health and promising future prospects. In this article we will dive into On Holdings recent earnings, stock performance & valuation,
growth potential, and the risks investor should consider.
About On Holdings
Founded in January 2010 by David
Allemann, Olivier Bernhard, and Caspar Coppetti, On Holding AG is a Swiss-based
company specializing in the development and distribution of sports products,
including footwear, apparel, and accessories. The company's innovative approach
to athletic footwear, characterized by its patented CloudTec technology, has
revolutionized the running experience. On Holding's products cater to
high-performance running, outdoor activities, training, and everyday wear. The
company sells its products worldwide through independent retailers,
distributors, its own online platform, and branded stores.
On Holding Financial
Performance
In Q1 2025, On Holding reported
revenue of $821.5 million, marking a 45.8% increase compared to $563.5 million
in Q1 2024. This substantial growth reflects the company's expanding global
footprint and strong consumer demand. However, the earnings per share (EPS) for
Q1 2025 stood at $0.19, a decrease of 38.7% from $0.31 in Q1 2024.
On a trailing twelve month TTM
basis, the company's TTM revenue reached $2.86 billion, up 37.57% from $2.08
billion in Q1 2024. The trailing twelve months (TTM) EPS rose by 65.12% to
$0.71 from $0.43 in the previous year, indicating growth in profitability
despite recent quarterly decrease in EPS. Free cash flow per share (TTM) also
increased by 31.18% from $0.93 to $1.22, highlighting strong cash generation
capabilities.
On Holding maintains healthy
margins, with a gross profit margin of 60.62%, net profit margin of 8.18%, and
free cash flow margin of 15.01%. The return on assets (ROA) is 7.25%, and
return on equity (ROE) is 15.73%, reflecting efficient use of assets and equity
to generate earnings. The company's debt-to-equity ratio stands at a
conservative 0.23, indicating prudent financial leverage.
Looking at On Holding's financial
performance over the past five years, the company has been growing its revenue
at a 52.2% CAGR. Net income turned positive in 2022, while free cash flow
became positive in 2023, and both are growing rapidly.
On Holding 2025 Financial
Forecast
Looking ahead, analysts forecast
revenue for 2025 to be $3.54 billion, a 35.85% increase from 2024's $2.61
billion. The projected non-GAAP EPS for 2025 is $1.16, up 6.51% from $1.09 in
2024. The consensus analyst price target is $65.38 , with a strong buy rating,
suggesting an 11.88% potential upside from current levels.
ONON Stock Price Performance
and Valuation
At the time this article is
written, On Holding stock was trading at $58.44. Over the past year, On
Holding's stock price has surged by 52.1%, significantly outperforming the
S&P 500's 10.1% gain during the same period. Since its IPO in September
2021, the stock has appreciated by 50%, compared to the S&P 500's 31.2%
increase.
Valuation metrics include a TTM
price-to-sales (P/S) ratio of 6.65 and a forward P/S of 6.37. The non-GAAP TTM
price-to-earnings (P/E) ratio is 60.96, with a forward P/E of 50.59. The TTM
price-to-free-cash-flow (P/FCF) ratio is 43.93.
Based on FinChat data, looking at
the valuation from 2022 until now, On Holding stock has been trading at a
forward P/S ratio slightly above the average and a forward P/E ratio slightly
below the average. This suggests the stock is still trading at fair value, as
On Holding continues to grow rapidly, with revenue increasing by more than 30%
per year. These multiples may appear higher than the industry average, but this
is justified, as On Holding has a strong brand and is growing faster than its
competitors.
On Holding Growth Potential
On Holding's business growth
trajectory is supported by several factors.
- Multi-Channel Success
On Holding's Q1 2025 results underscore the effectiveness of its multi-channel strategy, driving significant overall net sales growth. The direct-to-consumer (DTC) channel demonstrated exceptional momentum, surging by 45.3%, highlighting the brand's successful direct engagement with consumers through its own online platforms and retail stores. This increased DTC share, now representing 38.1% of total net sales, is particularly impactful as it typically carries higher profit margins by eliminating wholesale intermediaries.
Simultaneously, the wholesale channel also exhibited strong demand, growing by 41.5%. This balanced approach allows On Holding to leverage the extensive reach and established customer bases of its retail partners while simultaneously fostering deeper relationships and capturing greater profitability through its DTC efforts. The synergy between these channels contributed to an improved gross profit margin of 59.9%, demonstrating the financial benefits of this diversified sales approach. - Geographic Expansion
In Q1 2025 On Holding sales surge 130.1% in Asia-Pacific, underscoring vast potential in high-growth markets like China and Southeast Asia. The company’s ability to penetrate these regions while preserving its premium brand image positions it strongly for global expansion.
Continued robust growth in established markets like North America and Europe complements emerging market opportunities, creating a diversified growth strategy. This balanced approach mitigates risks from regional economic fluctuations and enhances On Holding’s global footprint. By leveraging strong brand equity and strategic market entry, the company is well-equipped to capture demand in both developed and emerging markets, supporting sustained growth. However, navigating competitive pressures and potential tariff impacts will be crucial to maintaining momentum in these dynamic regions. - Innovation and Product
Development Capabilities
On Holding’s growth strategy hinges on its commitment to innovation, blending performance and design to lead the athletic footwear industry. Its Swiss engineering heritage and focus on biomechanics and materials science drive products like the Cloud 6 and Cloudsurfer 2, fueling strong Q1 2025 performance. Extending innovation to apparel and accessories, On Holding is evolving into a comprehensive sportswear brand, leveraging its scalable CloudTec technology across diverse product categories to meet varied consumer needs.
The consistent product launches reflect robust investment in innovation infrastructure. This focus sustains On Holding’s premium positioning, strengthens its competitive edge against industry giants, and supports long-term growth by continuously delivering cutting-edge, consumer-driven solutions across global markets.
Risks to Consider
While On Holding stock looks like
a good opportunity, investors should be aware of potential risks.
- Intense Competition
On Holding operates in a fiercely competitive athletic footwear and apparel market. It faces pressure from established global giants like Nike, Adidas, Puma and Under Armour, alongside numerous newer brands. To succeed, On Holding must continuously innovate its products and maintain strong brand appeal. Failing to do so risks losing market share to rivals. This constant need for differentiation and effective marketing is crucial for the company's sustained growth and profitability in a crowded industry. - US Tariff Risk
On Holding heavily relies on global supply chains, with significant production in Asian countries like Vietnam, China, and Indonesia. New or increased US tariffs on goods imported from these regions pose a substantial risk. Such tariffs would increase production costs, either eroding On Holding's profit margins or forcing higher consumer prices, potentially reducing demand. While the company diversifies its supply chain, rapid shifts are challenging and costly. These tariffs could also create a competitive disadvantage and introduce planning uncertainty, ultimately impacting On Holding's financial performance and market position in the US. - Changing Consumer Preferences
The fashion and athletic wear industry is highly volatile, driven by rapidly evolving consumer trends and preferences. On Holding faces the risk that demand for its products could significantly decline if there's a shift away from its current styles, designs, or core technologies. Staying relevant requires constant monitoring of the market and agile product development to align with what consumers want next. A failure to adapt could directly impact sales volumes and market position.
Conclusion
On Holding AG's impressive
financial performance, innovative product offerings, and strategic market
expansion underscore its strong growth potential. While valuation metrics are
on the higher side, they reflect the company's robust growth prospects and solid
fundamentals. Investors seeking exposure to the dynamic athletic footwear
market may find On Holding an attractive addition to their portfolios.
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