Is On Holding Still Attractively Priced After a 3-Year 184% Surge? A DCF-Driven Analysis

The stock of On Holding AG (NYSE: ONON) has surged 184% over the past three years, fueled by its meteoric rise as a global lifestyle brand. Yet, with the market price now at $46.49 per share as of November 2025, the critical question remains: Is the stock still undervalued, or has the rally priced in all future growth? To answer this, we turn to discounted cash flow (DCF) valuation-a method that strips away market noise and focuses on the fundamentals of free cash flow (FCF), growth assumptions, and risk.

DCF Valuation: A Tale of Two Models

According to a DCF analysis by AlphaSpread, On Holding's intrinsic value is estimated at $50.58 per share, implying an 8% undervaluation relative to its current price. This valuation hinges on two key components: a present value of cash flows over the next five years ($2.4B CHF) and a terminal value ($10.6B CHF), totaling $13B CHF in present value. Dividing this by 326.5 million shares yields the $50.58 fair value.

However, another DCF model from Yahoo Finance suggests a higher intrinsic value of CHF66.20 per share, or roughly $72.50 at the current exchange rate, using a 7.9% discount rate derived from a levered beta of 1.145. This discrepancy highlights the sensitivity of DCF models to assumptions, particularly around growth rates and currency conversion.

Growth Assumptions: Optimism vs. Reality

The DCF models rely on two growth phases: a high-growth period followed by a stable terminal growth rate. For On Holding, the implied free cash flow growth rate embedded in the current share price is 15.6%, according to a Reverse DCF analysis. This is notably higher than the 2.9% terminal growth rate used in the AlphaSpread model, which aligns with the 5-year average of Swiss government bond yields-a conservative benchmark for long-term growth as reported by On Holding.

Yet, recent financial data raises questions about the sustainability of such optimism. On Holding's full-year 2024 FCF was $511.38 million, but this declined to $437.65 million by September 30, 2025-a 13% year-over-year drop. Similarly, 12-month FCF fell by CHF260.70 million compared to 2024. While the company raised its 2025 full-year sales guidance to at least 28% growth on a constant currency basis according to its financial release, the FCF contraction suggests operational or capital allocation challenges may be emerging.

Post-Rally Viability: Can the Stock Justify the Hype?

On Holding's Q1 2025 results provide a mixed picture. The company reported record net sales of CHF726.6 million, driven by strong DTC and wholesale performance. This bodes well for near-term revenue growth. However, translating sales into FCF requires disciplined cost management and efficient working capital. The recent FCF decline could signal either temporary headwinds (e.g., inventory buildup) or structural issues (e.g., rising capital expenditures).

The Reverse DCF model implies that the market expects 15.6% FCF growth over the next decade. Given On Holding's 28% sales growth guidance, this would require maintaining or improving its FCF margin-a tall order in a competitive market. If the company fails to convert sales into cash flow, the DCF-derived fair value of $50.58 or CHF66.20 may become aspirational rather than achievable.

Risk and Reward: A Balancing Act

The 7.9% discount rate used in the DCF models reflects On Holding's moderate risk profile, as evidenced by its beta of 1.145. However, this rate assumes a stable macroeconomic environment and no material shifts in the company's business model. Risks such as currency fluctuations (given its Swiss-franc-denominated cash flows), supply chain disruptions, or brand saturation could justify a higher discount rate, thereby lowering the intrinsic value.

Conversely, if On Holding executes its growth strategy-expanding its DTC channels, launching innovative products, and maintaining pricing power-the 15.6% FCF growth assumption could prove conservative. The recent sales guidance and brand momentum suggest the company is not resting on its laurels.

Conclusion: A Buy, But With Caution

On Holding's stock appears to offer a compelling risk-reward profile. The DCF models suggest undervaluation, and the company's operational momentum supports further growth. However, investors must remain vigilant about the recent FCF decline and the feasibility of sustaining high growth in a mature market. For those willing to accept moderate risk and a 7.9% discount rate, On Holding still looks attractively priced-provided the company can bridge the gap between sales and cash flow.