Is On Stock Pricing In Too Much Growth After Its Recent Surge?

• If you are trying to figure out whether On Holding is a bargain in the sportswear space or already priced for perfection, you are in the right place to unpack what the current share price is really implying.
• The stock has bounced sharply in the short term, up about 9.0% over the last week and 29.1% over the past month, even though it is still down roughly 15.0% year to date and 20.2% over the last year after a huge 161.1% gain over three years.
• Recent headlines have focused on On's rapid expansion in performance footwear, new product launches, and growing brand visibility in key global markets. All of this helps explain why sentiment and the share price can swing so quickly. Investors are weighing the buzz around its premium positioning and growth story against concerns about how much of that future success is already priced in.
• Against this backdrop, our valuation framework currently gives On Holding a score of 1 out of 6, meaning it only screens as undervalued on one of six key metrics. We will break down what different valuation approaches say about that price tag and then finish with a more holistic way to judge whether the stock truly fits your strategy.

On Holding scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: On Holding Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today. For On Holding, this means taking expected Free Cash Flow and adjusting it for the time value of money and risk.

The company currently generates roughly CHF 331.7 million in free cash flow. Analysts see this rising steadily, with projections climbing into the mid hundreds of millions of CHF over the next decade, reaching an estimated CHF 1,014.1 million by 2035, based on a 2 Stage Free Cash Flow to Equity model that extends analyst forecasts with Simply Wall St extrapolations.

Using these projections, the DCF model arrives at an intrinsic value of about $54.45 per share. That is roughly 13.6% above the current market price. This implies the stock may be trading at a discount and that the market may be underestimating the durability of On Holding's future cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests On Holding is undervalued by 13.6%. Track this in your watchlist or portfolio, or discover 919 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for On Holding.

Approach 2: On Holding Price vs Earnings

For profitable growth companies like On Holding, the Price to Earnings, or PE, ratio is a useful way to gauge how much investors are paying today for each dollar of current profits. The higher the expected growth and the lower the perceived risk, the more investors are usually willing to pay, which translates into a higher, but still justifiable, PE multiple.

On Holding currently trades on a PE of about 56.0x, which is well above both the Luxury industry average of roughly 21.3x and the broader peer group average of about 29.6x. At first glance, that premium suggests a lot of future success is already priced in. To refine that view, Simply Wall St uses a proprietary “Fair Ratio” for each stock, which in this case is 29.0x. This Fair Ratio is designed to reflect what a reasonable PE should be given On Holding's earnings growth outlook, profitability, size, industry and specific risk profile, rather than relying on blunt comparisons with broad peer or industry averages.

Because On Holding's actual PE of 56.0x sits well above its Fair Ratio of 29.0x, the multiple analysis indicates the shares look expensive on current earnings.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your On Holding Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of a company with a concrete financial forecast and a clear sense of fair value. A Narrative is your story for On Holding in numbers, where you translate your expectations for future revenue, earnings and margins into a fair value estimate that you can directly compare to today’s share price to decide whether to buy, hold or sell. On Simply Wall St, Narratives live in the Community page and are used by millions of investors, making it easy to build or adapt a view without needing to be a valuation expert, while the platform keeps each Narrative up to date as new earnings, guidance or news flows in. For example, one bullish On Holding Narrative might lean into margin gains, global expansion and premium pricing to justify a fair value near the high analyst target of roughly CHF 79. In contrast, a more cautious Narrative could emphasize execution risks, competition and macro headwinds to support a fair value closer to the low end of about CHF 40.

Do you think there's more to the story for On Holding? Head over to our Community to see what others are saying!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com