Does On Stock Present an Opportunity After 24% Slide Despite Strong Cash Flow Outlook?

Is On Holding’s Stock Still a Buy? Let’s Break It Down

If you’re staring at On Holding’s ticker, wondering what comes next, you’re not alone. The last year has been a rollercoaster for ONON shareholders. The stock has dropped nearly 24% in the past 90 days, even as it’s still up just over 7% compared to a year ago. After such swings, the big question is whether today’s price really reflects the company’s future potential, or if the recent dip is signaling increased risk or uncertainty.

Market conditions can be unpredictable, but On Holding is no stranger to volatility. The last 30 days alone saw over a 15% drop, coinciding with shifts in consumer sentiment and broader worries about growth stocks. Some analysts still see a lot of runway left for this athletic footwear brand. The current price sits at a meaningful discount compared both to consensus analyst targets (about 46% higher than today’s levels) and to most fair value estimates, which may intrigue value-seekers.

Let’s talk numbers. When we score On Holding’s valuation across six standard checks—such as price-to-earnings and future growth potential—the company is undervalued by 2 out of 6 measures. That is a value score of 2. While not a screaming bargain, it is also not wildly overpriced by those standard yardsticks. But is that the whole story?

In the next section, I’ll break down the main valuation methods and how On Holding stacks up. And stay tuned for an even deeper perspective on the company’s true worth that will be discussed at the end.

On Holding delivered 7.9% returns over the last year. See how this stacks up to the rest of the Luxury industry.

Approach 1: On Holding Cash Flows

The Discounted Cash Flow (DCF) model estimates what a company is really worth by projecting its future cash flows and then discounting those flows back to today using a required return. This helps investors see what a business could be worth if those future cash flows actually materialize.

For On Holding, the most recent published Free Cash Flow (FCF) stands at $330.8 Million. Analysts expect On Holding’s FCF to more than double within a decade, reaching $977.4 Million by 2035. These yearly cash flow projections were analyzed using a two-stage equity DCF model, which aims to capture both near-term and long-term growth periods so that the estimate is comprehensive.

The result is that the DCF calculation places On Holding’s intrinsic value at $53.91 per share. Compared to the current share price, the stock is trading at a 16.5% discount to its estimated fair value. In summary, the model suggests that On Holding is 16.5% undervalued based on its future cash flow potential.

Result: UNDERVALUED

Our DCF analysis suggests On Holding is undervalued by 16.5%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: On Holding Price vs Earnings (PE Ratio)

The price-to-earnings (PE) ratio is a classic valuation tool for companies that are generating consistent profits, like On Holding. It provides a quick way to gauge how much investors are willing to pay for each dollar of the company's current earnings. Generally, a higher PE can reflect stronger growth expectations, lower perceived risk, or premium brand value. A lower PE may point to more modest prospects or increased uncertainty.

Looking at the numbers, On Holding currently trades at a steep 87.4x PE ratio. To put that in perspective, the typical luxury industry stock has an average PE ratio of around 19.9x, and the company’s peer group averages 18.8x. This means On Holding is priced at nearly four to five times the earnings multiple of its industry and peers. This suggests the market has significant expectations for its future growth and profitability.

It is also important to consider the proprietary Fair Ratio, which blends factors like growth outlook, margins, and risk profile. For On Holding, the Fair PE Ratio comes in at 33.0x. This is significantly below the actual PE, indicating that investors are paying a substantial premium compared to what the fundamentals would suggest as fair value.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your On Holding Narrative

Beyond ratios and models, a "Narrative" is the story you believe about a company, connecting what you see in its products, management, and market trends to the numbers behind its revenue, margins, and fair value. Narratives help turn abstract data into a simple, actionable view: you describe how you think On Holding will grow, the kind of profits it will make, and what the business should be worth. You can then see how this view compares to the current share price.

On the Simply Wall St platform, Narratives are an easy tool used by millions of investors to build, compare, and update their investment stories. This makes it simple to decide if a stock is under- or overvalued. Narratives update automatically when new reports or news are released, showing how the story evolves in real time. This approach empowers you to decide when to buy or sell by comparing your fair value with the actual market price, using your own perspective or benchmarks from the community.

For example, with On Holding right now, some Narratives predict the price could rise as high as CHF79.07 on sustained global momentum, while others see a potential drop to CHF40.11 if growth slows. Your chosen Narrative allows you to invest in the story you believe most.

Do you think there's more to the story for On Holding? Create your own Narrative to let the Community know!

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.

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