On Holding has more than doubled this year, outperforming megacaps like Apple or even larger indexes like the S&P 500, both of which gained about 28% this year. On Holding is Thursday's selection for IBD 50 Stocks To Watch.
In comparison, On has gained a whopping 115%. But three signs show that the stock has plenty of room to run still.
First, shares are approaching a new buy point in a bullish chart set up.
Second, the stock pulled back to the 21-day moving average on Monday but is now heading higher toward a buy point of 60.12 in a bullish three-weeks-tight pattern. The buy point is also the stock's all-time high.
Third, shares have rallied since the company's third quarter results were announced Nov. 12. Sales grew 43% to $751.9 million although earnings per share of 18 cents declined 19% from the prior year. But the company reported a record profit margin of 60.6% — its highest since the stock listed on the New York Stock Exchange in September 2021.
Its Direct to Customer (DTC) channels showed strong growth of 49.8% annually and accounted for 38.8% of third quarter revenue. The company also stayed focused on full-price sales, which boosted revenue. The Paris Olympics and strong partnerships with influential personalities like Zendaya also helped during the quarter.
The athletic-shoe maker remained optimistic on the current quarter and raised its full year sales growth guidance to at least 32% and profit growth outlook to 60.5%.
According to IBD Stock Checkup, On Holding ranks first in IBD's shoes and apparel manufacturing group. The Relative Strength Rating of 92 reflects the stock's strong performance over the past 52 weeks. The EPS Rating of 89 is more than adequate. The overall score, or Composite Rating, stands at 93.
Mutual funds have been loading up on the stock and own 55% of outstanding shares. More funds have been net buyers over the past seven quarters and in recent weeks, earning ONON stock an Accumulation/Distribution Rating of B+.
The Virtus KAR Mid Cap Growth Fund (PHSKX) and the Alger Small Cap Growth Fund (ALSCX) hold On stock. Both are in the IBD Mutual Fund Index.
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