The Bull Rankings scorecard — our quality-growth score is 75.2 / 100, built from three pillars scored 0–100: Quality 73, Growth 96, Value 71 (valuation is judged against sector peers). At today's price, our reverse-DCF read says the market is implicitly betting on free-cash-flow growth of about 25% a year next year, fading to 4% a year by year ten — a gauge of how much optimism is already in the stock.
The thesis
On Holding AG is a growth‑oriented value play that is trading at a discount to its peers while delivering a 30 % YoY revenue surge and a 6.8 % profit margin. The Bull Rankings model gives it a 75.2/100 score, with Growth at 96 and Value at 71. The high Growth pillar is the engine of the thesis: a 30 % revenue jump, a 12.5 % ROE, and a 21.9 × P/E that still sits below the sector average. The Value pillar, though the softest, is still 71—meaning the stock is cheaper than most of its cohort. In short, the price rewards a company that is expanding rapidly, yet remains attractively priced.
What the business actually is
On Holding AG sells performance sports gear under the On brand across six regions: Switzerland, Europe, the Middle East, Africa, the United States, the Americas, and the Asia‑Pacific. Its catalog spans athletic footwear, apparel, and accessories for performance running, performance outdoor, performance all day, performance training, performance tennis, and young movers. Distribution is two‑tiered: wholesale to specialty, general sporting goods, outdoor, luxury, street fashion, and lifestyle retailers, and direct‑to‑consumer via owned stores and e‑commerce. The “performance running” line is the flagship, driving most of the recent 30 % revenue growth.
Why it can (or can't) keep compounding
The durability case hinges on high returns on capital and a protective moat. With a debt‑to‑equity of 0.29, the company can fund growth without overleveraging. Its 6.8 % profit margin is modest but stable, and the 12.5 % ROE indicates efficient use of equity. The Bull Rankings model flags Durable high returns as a signal, underscoring that the company consistently generates cash beyond what competitors can match. The moat is two‑fold: a patented “CloudTec” cushioning technology that differentiates the footwear, and a direct‑to‑consumer channel that builds brand loyalty and captures higher margins. Competitors would need significant R&D and marketing spend to replicate both the tech and the brand equity, creating a high entry barrier.
The valuation question
The current price of $30.85 implies a P/E of 21.9, while the PEG ratio sits at 0.48—well below 1, suggesting the market is pricing in modest growth expectations. That starting rate is lower than the 30 % revenue growth just reported, meaning the market is already pricing in a slowdown. If the business sustains its 30 % revenue pace, the stock is undervalued; if growth stalls to the 25 % implied rate, the current price is already optimistic. The analyst consensus 1‑year target of $43.56 and a range of $20.01–$71.66 further indicate that some view the stock as a long‑term value play, while others see room for upside.
The bear case
The strongest skeptic points to the Diluting shareholders signal. On Holding has been issuing equity to fund expansion, and the current debt‑to‑equity of 0.29, while low, could rise if the company continues to raise capital. If the dilution trend accelerates, the 12.5 % ROE could compress, and the 6.8 % margin might erode under competitive pricing pressure. A concrete trigger would be a debt‑to‑equity above 0.5 or a margin drop below 5 %, which would erode the profitability cushion that supports the high ROE.
What would change our mind
- Revenue growth falling below 20 % YoY would undermine the Growth pillar that fuels the thesis.
- Profit margin slipping below 5 % would erode the moat and signal pricing pressure.
- Debt‑to‑equity climbing past 0.5 would raise concerns about financial leverage and potential dilution.
If any of these thresholds are breached, the Bull Rankings model would likely downgrade the Growth score, and the valuation would shift from a discounted growth play to a more cautious stance.