Wall Street Is Underestimating This Stock. Here's My Case for Why It Could Triple in 7 Years.

On Holding (NYSE: ONON) designs and sells premium athletic footwear, apparel, and accessories. Footwear generated about 93% of its 2025 sales, while wholesale and direct-to-consumer (DTC) channels accounted for roughly 58% and 42% of revenue, respectively.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Shares of On closed at around $28.40 on Sept. 3. A tripling over the next seven years would put the stock near $85, requiring roughly 17% annualized price appreciation.

Although the target may sound aggressive, reaching it may be more achievable than it first appears. On currently trades at only about 13.6 times forward one-year earnings, down from roughly 22.2 times forward one-year earnings at the end of 2025. If that valuation simply holds, earnings will also need to compound at about 17% annually for the stock to triple. Wall Street already expects adjusted earnings per share to grow roughly 18.9% in fiscal 2027.

Slower sales may not mean a weaker brand

Investors have become much more cautious after On's second-quarter results. The stock suffered its worst one-day decline on record after Q2 sales missed expectations and Americas growth slowed to 13% on a constant-currency basis from 17% in the previous quarter.

However, I think one detail deserves more attention. On deliberately limited sales to wholesale partners in a highly promotional market to protect pricing and preserve its premium brand positioning. On the other hand, DTC sales increased 34.3% year over year in constant currency and reached 45.7% of total revenue in Q2. Gross margin expanded by 3.9 percentage points year over year to 65.4%.

Hence, slower wholesale growth does not necessarily mean consumer demand is weakening at the same pace. On may simply be sacrificing some near-term sales to protect pricing and shift more business toward its own higher-margin channels.

Multiple growth areas

On's growth is also becoming less dependent on the Americas market and the footwear category alone. In fact, the company's sales in Asia-Pacific jumped 54.7% year over year in constant currency in Q2. Asia-Pacific now accounts for about 20% of the company's revenue. Apparel sales also increased by 56.2% year over year, although apparel still accounts for only about 6% of companywide sales.

Management expects sales to grow year over year on a constant currency basis in the low-20% range and an adjusted EBITDA margin of 19.5% to 20% in fiscal 2026. On has targeted 20% to 25% annual sales growth and an adjusted EBITDA margin above 20% as its long-term goals.

On does not need to hit the upper end of those long-term targets for my case to work. At today's roughly 13.6 times forward multiple, around 17% annual earnings growth could theoretically support a threefold stock-price increase without any valuation expansion.

The biggest risk will be if recent wholesale weakness signals broader deterioration rather than disciplined inventory management. On's share count is also still rising, while tariffs and a promotional U.S. footwear market could pressure future profitability.

Hence, I believe that DTC growth is a critical number to watch. As long as people continue buying directly from On at strong growth rates, the seven-year compounding case remains much easier to defend for this consumer discretionary stock.

Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends On Holding. The Motley Fool has a disclosure policy.