On Holding stock analysis. ONON stock.
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ON Holding sells the popular on cloud running shoes that have taken the world by storm.
Right now, the company is valued at roughly 7.8 billion swiss francs. Revenue over the last 12 months was 1.2 billion, net income was 58 million and adjusted ebitda was 165 million.
That means the company is valued at 6.4 times revenue, 139 times earnings or 47 times EBITDA.
That’s a steep valuation and the reason is that On is seeing exceptional growth.
Revenue for 2022 was 69% higher than 2021. And the company expects to grow another 39% this year.
That’s some of the strongest growth in the market right now and this growth is backed up by positive product reviews and strong google search data.
On top of that, On reports strong gross margins of 56% which are higher than both Nike and Lululemon. The company is clearly building a strong brand with an additional focus on sustainability. Its latest shoe, for example, contains 44% recycled materials.
On the other hand, rapid growth costs money and On’s negative cash flow stems from expansion in China and opening up stores. With only 371 million in cash on the balance sheet there’s a reasonable chance the company will need to raise more capital to pay for growth.
There’s no doubt that On running will be a bigger business in the future. The question is what type of returns are on offer from the stock.
Let’s assume that On grows revenue 40% this year, 30% the following year and then continues to compound at 20%. In that scenario, On would hit revenues of 11.5 billion by 2033. Apply a 10% net margin similar to Nike and we get 1.2 billion of net income in 10 years time.
#stocks #investing #stockstowatch #ONONstock
Visit our Substack for more: https://www.overlookedalpha.com
ON Holding sells the popular on cloud running shoes that have taken the world by storm.
Right now, the company is valued at roughly 7.8 billion swiss francs. Revenue over the last 12 months was 1.2 billion, net income was 58 million and adjusted ebitda was 165 million.
That means the company is valued at 6.4 times revenue, 139 times earnings or 47 times EBITDA.
That’s a steep valuation and the reason is that On is seeing exceptional growth.
Revenue for 2022 was 69% higher than 2021. And the company expects to grow another 39% this year.
That’s some of the strongest growth in the market right now and this growth is backed up by positive product reviews and strong google search data.
On top of that, On reports strong gross margins of 56% which are higher than both Nike and Lululemon. The company is clearly building a strong brand with an additional focus on sustainability. Its latest shoe, for example, contains 44% recycled materials.
On the other hand, rapid growth costs money and On’s negative cash flow stems from expansion in China and opening up stores. With only 371 million in cash on the balance sheet there’s a reasonable chance the company will need to raise more capital to pay for growth.
There’s no doubt that On running will be a bigger business in the future. The question is what type of returns are on offer from the stock.
Let’s assume that On grows revenue 40% this year, 30% the following year and then continues to compound at 20%. In that scenario, On would hit revenues of 11.5 billion by 2033. Apply a 10% net margin similar to Nike and we get 1.2 billion of net income in 10 years time.
#stocks #investing #stockstowatch #ONONstock
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NewsTranscript
00:00 This is one of the fastest growing stocks on the market right now.
00:03 Onholding sells the popular on-cloud running shoes that have taken the world by storm.
00:08 Right now the company is valued at roughly 7.8 billion Swiss francs.
00:12 Revenue over the last 12 months was 1.2 billion,
00:15 net income was 58 million and adjusted EBITDA was 165 million.
00:19 That means the company is valued at 6.4 times revenue, 139 times earnings or 47 times EBITDA.
00:27 That's a steep valuation and the reason is that On is seeing exceptional growth.
00:32 Revenue for 2022 was 69% higher than 2021 and the company expects to grow another 39% this year.
00:39 That's some of the strongest growth in the market right now and this growth is backed up by positive
00:44 product reviews and strong Google search data. On top of that, On reports strong gross margins
00:50 of 56% which are higher than both Nike and Lululemon. The company is clearly building
00:56 a strong brand with an additional focus on sustainability. Its latest shoe for example
01:01 contains 44% recycled materials. On the other hand, rapid growth costs money and On's negative
01:07 cash flow stems from expansion in China and opening up new stores. With only $371 million
01:13 in cash on the balance sheet, there's a reasonable chance the company will need to raise more capital
01:17 to pay for growth. There's no doubt that On will be a bigger business in the future. The question
01:23 is what type of returns are on offer from the stock. Let's assume that On grows revenue 40%
01:28 this year, 30% the following year and then continues to compound at 20%. In that scenario,
01:34 On would hit revenues of $11.5 billion by 2033. Apply a 10% net margin similar to Nike and we get
01:41 $1.2 billion of net income in 10 years time. With a 20 times multiple, that means the company would
01:47 be worth roughly $24 billion for an investment return of around 11.9% per year. That's not a
01:53 great long term return for what is a pretty optimistic forecast. However short term,
01:58 it's difficult to bet against this kind of growth. As a result, I give the stock a cautious bullish
02:03 rating. But these are my personal opinions, not financial advice and I hold no position in the
02:08 stock. For more detailed investing ideas, join our newsletter at overlookedalpha.com.