Growth stock On Holding is today's selection for IBD 50 Stocks To Watch as the footwear leader recovers from a stumble.
The stock is forming a cup-with-handle pattern with a buy point of 33.67. Shares found support at the 50-day moving average as they carved out the handle, according to IBD MarketSmith chart analysis.
Company earnings are due Aug. 15. The maker of sports shoes has seen good sales growth over the past seven quarters. Growth has ranged from 42% to 89%. Earning growth over the past five quarters has been even more impressive as the company reversed from losses in 2021.
For the first quarter, sales grew 80% to $459.3 million while earnings per share of 16 cents were up an impressive 203% from the prior year. The company also opened a new London store and achieved milestones, including top On athlete Hellen Obiri's win at the Boston Marathon and Iga Swiątek's first tennis tournament win at the Stuttgart Open.
Analysts Expect 80% Profit Growth
For the full year, the athletic gear company raised its sales outlook to 1.74 billion Swiss franks. It also maintained its gross profit margin outlook for 2023 of 58.5% and its EBITDA margin outlook of 15% even as it scales up operations.
Wall Street expects an earnings gain of 80% for 2023 to 54 cents per share. For the second quarter just ended, analysts polled by FactSet see earnings of 12 cents per share on sales of $470.4 million.
The growth stock has a near-perfect Composite Rating of 98 and a Relative Strength Rating of 95. The EPS Rating of 80 is adequate. On is based out of Zurich, Switzerland, and went public in September 2021 and trades exclusively on the New York Stock Exchange. The stock grew a fandom after tennis star Roger Federer bought a stake.
On Holding uses tubelike sponges that support faster running. Its Cyclon brand of running shoes is sold through a subscription product made of recyclable material. If the shoes wear out after six months, you get another pair and the used shoes are recycled.
The stock has gained a whopping 89% in 2023 so far. Shares sold off in May after the company's Q1 results, but have been recovering and forming the new base.
Growth Stock Leads Industry Group
On Holding makes sports shoes for running, outdoor and all-day activities in more than 60 countries worldwide. It operates through retailers and distributors and also has its own stores and website.
The growth stock leads the shoe manufacturer group, which holds 56th place among IBD's 197 industry groups.
Mutual funds own 35% of shares outstanding. Top funds holding the stock include the Fidelity Contrafund (FCNTX) and the Invesco Discovery Fund (OPOCX). More funds have been buying the growth stock over the past six quarters, earning ONON stock an Accumulation/Distribution Rating of B+.
Exchange traded funds that hold the growth stock include Global X Health & Wellness Thematic ETF and the Vanguard Total World Stock Index Fund ETF.
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