The battle of Nike vs On Holding: who has a better chance of "winning the marathon"

The shares of On Holding, a Swiss manufacturer of premium sports shoes, jumped by almost 19% on November 12, after the publication of its quarterly report, and have more than doubled over the past three years. The company will not offer discounts on Mark's merchandise during the holiday season, and its management raised its revenue growth forecast for the next three years. At the same time, Nike - one of On's competitors - is going through some tough times. But what if their competition is not a sprint but a marathon? Independent analyst Mikhail Zavaraev discusses the long-term prospects of the two companies.

Shares of Swiss premium athletic footwear maker, On Holding, soared 18% on Nov. 12 after it posted a strong quarterly report and once again raised growth forecasts for key operating metrics for the coming years.

For the third quarter of 2025, the company's net income increased 290% year-on-year and sales increased 25% (up 35% on a comparable basis). Adjusted net income per share for the period amounted to CHF 0.43 compared to analysts' expectations of only CHF 0.27. However, it should be noted that in the previous two quarters this figure was below the consensus forecast.

In addition, the company's management raised its revenue growth estimate in comparable prices for 2025 to 34% from 31%. Management also expects average annual revenue growth of 30% over the next three years, starting from 2026, rather than 26% as previously expected.

It is not surprising that in such conditions the company's securities are doing much better than those of most competitors, which cannot boast such positive dynamics of key operational metrics. Shares of On Holding have grown by more than 120% over the past three years, while Nike, for example, has collapsed by 40% over the same period.

A reasonable question arises, and why sneakers from On Holdings "run" so fast, and whether thanks to this Achilles (in this case On) can still catch up with the turtle (that is Nike).

Nike managed to do a similar thing in the second half of the last century, and relatively quickly became the market leader in athletic footwear, displacing the previous dominant players, Adidas and Puma.

It is hard to believe that On Holdings will repeat such success, although they will certainly take their share of the market. However, it is far from certain that the most affected in this case will be Nike (although the company in recent years has lost about $5 billion of its revenue in favor of competitors).

At the very least, Nike is well aware of the dangers posed by new and old competitors, and is responding to those threats in a timely manner. And its renewed development strategy - "Win Now", presented last year, is already beginning to bear some fruit.

The company's revenues for the last reported quarter ended August 31, 2025 grew by only 1% year-on-year, while profits fell by 31%.

Nevertheless, these figures were much better than expected by analysts, who forecasted a 5.1% drop in revenue. In turn, earnings per share amounted to $0.49 compared to market expectations of $0.27. This was the fourth quarter in a row when the company reported EPS above expectations.

We should not get complacent just yet. After all, Nike still expects revenue to fall again in the current quarter. However, in the future, once the transformation of the business is complete, Nike may well be able to grow revenue at a rate roughly in line with the industry. According to Mordor Intelligence's forecast, it will be 7.14% per year until 2030.

The Swiss manufacturer's share will continue to grow quite rapidly, at least for some period of time. But even if On maintains a revenue growth rate of 30% per year for the next 10 years, that figure will be roughly CHF 40 billion (last 12 months revenue was CHF 2.88 billion), or $49.4 billion after that time. Nike's revenue for the last 12 months was $46.4 billion, and in 10 years at a growth rate of 7% per year will turn into $91.4 billion.

At the same time, it is worth mentioning that growth of 30% per year for 10 years On will not be very easy to achieve. This is literally out of the realm of fantasy, especially since the company can no longer be called very small. Yes, On generates most of its revenue from footwear, and it has growth potential in the apparel segment, for example. But we should not forget that the total volume of the target market of this company is noticeably smaller than that of Nike, as it is focused on the premium segment.

Of course, Nike sneakers do not belong to the economy segment either, but still designed for a much wider audience.

As an example of hopes not quite fulfilled, we can recall another competitor of these companies from the premium segment - the Canadian Lululemon. Between fiscal 2018 and 2023 (the company's classification ended in January 2023), it managed to show impressive revenue growth rates - it grew by 25% per year on average. This couldn't help but have an impact on the quotes, which went from $50-60 as of mid-2017 to soar above $500 at the turn of 2023-2024.

However, following the slowdown in revenue growth, which in the next two years on average grew by "only" 14.3%, its quotations also followed the downward trend - by the current moment they have already collapsed three times from the highs.

In any case, the premium segment, and thus higher commodity prices, allows On Holding to show very high gross margins compared to both the industry and Nike.

Thus, at the end of the third quarter of 2025, it amounted to 65.7% and grew by 5.1 percentage points in annual terms. In turn, Nike's gross margin in the last quarter amounted to only 42.2% and fell by 3.2 percentage points in annual terms.

But it is unlikely that the management of the sports giant should sprinkle its head with ashes because of this. First of all, the decrease is temporary and is more likely to be due to the ongoing transformation of the business. Over time, this indicator should return to the average level, which for Nike is about 44-45%. Secondly, such a serious gap in the gross margin of these companies is largely offset by the level of net margin, including due to a higher share of marketing expenses in the premium segment players, as well as more efficient inventory management and high diversification of sales channels in Nike.

On's net margin for the third quarter of 2025 was 15%, up from 4.8% a year earlier. Nike had a margin of 6.2% in the most recent quarter, up from 9.1% a year earlier. But Nike's average net margin over the previous 15 years is more than 12%, while On has had a net margin of less than 10% in all previous years. No doubt this is due to active business development, and the company will show higher levels of this metric at maturity, but they are unlikely to be significantly higher than the level of the most recent quarter. At least, a sustainable net margin level above 15% is very rare for companies in this industry.

In terms of return on assets, On also looks slightly better at 8.93% for the last 12 months while Nike has a similar figure of 5.69%.

On the other hand, higher financial leverage (i.e. leverage and debt utilization) allows Nike to demonstrate a higher return on equity, which is 21.12% for the last 12 months compared to On's 15.98%. Both companies have quite high rates by the standards of most industries. Potentially, both companies could well demonstrate ROEs on par with the industry's best performers in the neighborhood of 27-30%, a performance that Nike has demonstrated in the past.

Unsurprisingly, given this kind of environment, both companies are trading at a serious premium to the market.

The P/E (share price to earnings) ratio - for the past 12 months and forecast - for the Swiss manufacturer is 49.24 and 25.32 respectively. Nike has 31.76 and 38.17, respectively. By comparison, the S&P 500 index has these metrics at 21.5 and 26.9 (as of Nov. 21).

Due to its faster growth, On's P/S (capitalization to revenue) multiple is significantly higher than Nike's 7.47 to 2.

In turn, a higher return on equity compared to the market implies a very high P/B (price to book value) multiple. It shows how much investors are willing to pay for each dollar of the company's net assets. For Nike it is 6.99, and for On Holding - 7.07.

Despite On's explosive growth in mid-November, based on its average target price, the stock's upside potential is now about 18% to its closing price on Nov. 25. Nike has a higher upside, currently at nearly 31%.

At the same time, the risks of investing in On Holding look much higher. At least, its beta (which shows how volatile a stock is compared to the rest of the market) is currently 2.18, compared to only 1.29 for Nike, which, among other things, boasts a dividend yield of 2.55%. On has no dividend.

Taking into account the negative example of Lulu, we can agree with this risk profile - On does not have much room for maneuver. Any steady slowdown in the company's growth rates will lead to a serious drop in its quotations. On the other hand, Nike's quotations will also fall if the new strategy fails, especially taking into account the current multiples of the company.

On is definitely a very risky story, largely tied to keeping growth rates high, as seen in its beta score. It doesn't pay a dividend, which means its stock doesn't even have that "safety net." But Nike doesn't look like a completely risk-free story either, and it's not a cheap stock overall. But if we have to choose between these two companies, Nike looks more attractive from the risk/reward point of view for an investor, in my opinion.

Does not constitute an investment recommendation.

This article was AI-translated and verified by a human editor