They also have more costs because of their growth ambitions and could probably improve on that. ON has really strong gross margins, where they are about 100 points ahead of their competitors, but at the moment they are not able to capitalize on that in terms of net profit margin. Granted, it is a short time frame and they could achieve very strong ROC in the future, but at the moment nobody can say for sure that they will because the future is uncertain and nobody has a crystal ball. I could understand if ON had really strong returns on capital to perhaps justify this valuation a bit, but their ROC is in the low double digits. And that is a ridiculous valuation, even for a company that could grow at strong double-digit rates over the next few years. And I am the type of investor who has no problem paying for quality, but at the current valuation ON is even too expensive for my taste.Įven compared to rivals such as Nike ( NKE), which itself trades at a premium, ON stands out. But that does not make it a good investment, because the price you pay is also extremely important. There is no doubt that On is a company with a high quality product and a bright future. And all this in a very competitive market. A year-on-year growth rate of 68.7% and a revenue of 1 billion is always a great achievement. AnalysisĪnyone who has seen the FY22 results can see that last year was very successful from a revenue growth perspective alone. So I would argue that this is not the right time to build a new position in this company, as there are many arguments against it, which I will talk about in the next few chapters. High-growth companies were very popular in that environment, but as the environment changed, the stock lost almost half its value over the next year and has now recovered to a price close to its IPO price.īut even now, almost one and a half years later, the share price is very expensive, despite the strong growth over the period. Their IPO timing was quite good as they were able to take advantage of high valuations on the stock market and were therefore able to get a very premium price, in my opinion. It shows how effective a company is at turning capital invested by shareholders and other debtholders into profits.On Holding ( NYSE: ONON) is a relatively new company in a highly competitive market. Return on invested capital (ROIC) is net income after dividends divided by the sum of debt and equity. Indicates a company's profitability in relation to its total assets. The rate at which the company's net income has increased to the same quarter one year ago. It indicates the company's profitability. Net income divided by revenue of the last 4 quarters. Net Income is the profit after all expenses have been deducted from the total revenue. It indicates the efficiency of using their resources to produce goods or services.Įarnings before tax and interest payments. Gross profit is the profit after subtracting the costs of making and selling its products or the costs of providing its services. Revenue is the sum of all cash flow into the company. However, the ratio is difficult to compare between industries where common amounts of debt vary. Price to Book Ratio is the Market cap divided by the Book value of the companyĪ higher ratio indicates a higher risk. Market cap divided by the revenue in the most recent year. A lower PEG could mean that a stock is undervalued.Įarnings divided by outstanding shares. The ratio between the P/E ratio and the growth rate of the company's earnings per share in the last twelve months. A high ratio could indicate that the stock is overvalued or investors are expecting high growth. A low ratio could indicate that the stock is undervalued or investors aren't expecting high growth. Ratio between share price and earnings per share.
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