1 Growth Stock Down 38%: A Hidden Gem to Consider

In the ever-changing landscape of the stock market, it's not uncommon to see growth stocks experience significant pullbacks. One such stock that has recently caught our attention is On Holding (ONON -0.14%), which has declined by 38% from its highs. Despite this pullback, the Swiss-based athletic footwear and apparel company presents an attractive opportunity for investors.

On Holding has gained a large and loyal following of affluent fans who are willing to pay premium prices for its comfortable footwear and athletic wear. The company's unique CloudTec running shoes, often described as looking like a "mouth in dire need of braces," have become a popular choice among runners. With a full line of athletic wear at prices similar to or even slightly more expensive than high-end sportswear giant Lululemon Athletica, On Holding has carved out a niche for itself in the competitive sportswear market.

One of the key factors that make On Holding a compelling buy is its low brand presence and high growth potential. The company is at the intersection of these two factors, giving it ample opportunity to keep growth rates high as it continues to make itself known in new regions. Its upscale target market also provides resilience during harsh economic conditions, as affluent consumers are more likely to maintain their spending on premium products. Additionally, On Holding's premium pricing and high full-price sales rate lead to robust profitability, with the company expecting to maintain a fundamental profitability of 60% gross margin in 2024.

On Holding's brand awareness is still low in many markets, with rates of 4% or less in countries like France and Australia. In affluent U.S. cities, brand awareness ranges from 7% in New York to 12% in Dallas. This presents a significant opportunity for the company to expand its customer base and drive growth. With a four-pronged strategy focusing on growing brand awareness, expanding markets through a multichannel model, innovating with product development, and scaling efficiently, On Holding is well-positioned to capitalize on its growth potential.

The company's strong pipeline of new products, celebrity endorsements, and focus on technology and automation will drive engagement and growth in 2024 and beyond. With a price-to-sales ratio of 6.4, On Holding's valuation may not be objectively cheap, but it is reasonable for a high-growth stock. Given its immense potential for international expansion and strong fundamentals, On Holding could be an incredible growth stock over the next few years, making it an attractive buy at current levels.



As always, it's essential to conduct thorough research and consider multiple perspectives when evaluating investment opportunities. While On Holding presents an attractive opportunity, investors should also consider the broader market trends, geopolitical dynamics, and potential risks before making a decision.

In conclusion, On Holding's low brand presence, high growth potential, resilience in harsh economic conditions, and strong growth prospects make it a compelling buy despite its recent pullback. With a balanced and analytical approach to investing, investors can capitalize on opportunities like On Holding and build a diversified portfolio that focuses on long-term growth and sustainability.