ON is a strong long-term buy due to optimistic 2029 guidance (20% CAGR, higher margins) and a significant $1B buyback reducing shares.

Holding shares had a rough start to 2026, down 40% at the close of trading yesterday , but today the share price is up 10% after management gave a very optimistic outlook not only for the rest of this year, but also for the end of the decade.

They have given medium-term guidance, which they give every 3 years, so it will be in effect until the end of 2029. They are expecting a compound annual growth rate of about 20 %.

They have outperformed their guidance over the past 3-year period , so this time it could be a little higher than that and they are expecting the profit margin to continue to increase.

A 60% profit rate is no longer enough. Now they have set a target profit rate of 65%.

And the big thing that's catching investors' attention today is the $1 billion buyback. This could be around 10% of the company. This is a pretty big buyback. This will cost a lot of cash on the balance sheet, but considering the current market price of the shares, it is probably the right decision.

And investors , at least in the short term, are clearly excited about it.

So, let's discuss in detail what is happening in the shares of On. This is a stock that I own and have been quite interested in for a long time, mainly because it is a phenomenal compounder , although it has had a pretty bad year.

The stock was down 42% by the end of trading yesterday, but today is a pretty good day. I think this actually understates the issue a bit. Shares rose nearly 10% last week. As I was recording, with a few hours left before the transaction closed, it was up about 9% on the day. It was up a little over 10% earlier today.

So, what is really happening? The thing is, On organized an Investor Day presentation. I'll start with the big numbers here because these are what investors should focus on in the long term, and this was a big question in the case of On. So, how strong is the business really?

They actually lowered their guidance for the full year last quarter. It wasn't a very big decrease. They are still expecting double-digit growth , but the issue was a bit worrisome.

Is everything slowing down at the higher levels of the market ? This is consistent with what we have seen with many brands and shoe companies, but it has also sparked some hope among investors.

The big thing here is that the compound annual growth rate (CAGR) is expected to remain high through 2029, meaning from 2026 to 2029. This is calculated on a constant currency basis.

This is really important for ON because they publish accounts in Swiss francs. I really think that as such a large American company, they should publish their accounts in US dollars.

A large part of their business is also in the United States , but let's see if they make that change.

They expect the gross profit margin to be at least 65%. The last time they made this prediction, it was at least 60%. And they expect SG&A leverage adjusted EBITDA margin to be 22% by 2029.

That adjusted EBITDA margin was around 20% in the last quarter. So, it's not a huge increase, but a good increase in terms of adjusted EBITDA margin, which is a measure of cash flow from the business.

Therefore, the 3-year adjusted EBITDA CAGR is expected to be more than 20%.

They also announced a $1 billion buyback program. Here's why this is important. Today, ON's market capitalization is about $9.9 billion. So, subtracting $1 billion from the current one, would take about 10% of the outstanding shares.

Which will be purchased through the company. So, this could be a big blow to the company's price-to-earnings multiple.

And if you add to that the compound growth —the compound growth of revenue, the compound growth of operating leverage that we talked about— then that could serve as fuel for the company in the future , because I think the reason to be optimistic about ON is not just the continuation of this revenue growth.

This is a 27% compound annual revenue growth in US dollars over the last 3 years. So, it will probably come down to around 20% in the next 3 years. That's still a really strong growth rate.

However, if this price -to-earnings multiple of 20 or 16 expands in the next few years and the number of shares decreases, the impact of the multiple expansion on the share price will increase even more.

I would like to discuss other things that caught my attention in this presentation for investors. Playbook, there's not much to discuss here. Create innovative products, validated by athletes and talents.

So, you know, this is something that they've done, by partnering with some of the best athletes in the world, especially female athletes in some of their sports. This is something that is changing.

I'll come back to that later. Provide a premium experience. So, this is going to be a direct-to-consumer channel. They now have 100 stores. Earn high-quality income. Well, we want very good margins, and at the same time, we want innovation in culture and excellence.

This is, you know, a kind of corporate language that means we really want to be a good company.

But after last week's announcement that they are now sponsoring football star Mbappe and have a major partnership with him , they have also said they are going to enter the golf business.

So, the reason these are two very important markets for them is that On can grow in two ways. This could increase market share in areas where they currently have sales. The company's journey began with running products.

I think a lot of their shoes are mainly sold to casual users, like busy mothers in the suburbs. For example, I have several pairs of On shoes, so I'm kind of the perfect target market for them.

But these businesses wo n't take you very far. If you want to be as big as Nike or Adidas, you have to expand into other markets as well.

So, which direction will you grow? They chose football as their first step. It's a partnership with Mbappe, so I think it will be very interesting to watch. Will they be able to capture some market share with just cleats ?

This is something they are going to bring to the market. We saw Mbappe wearing them. Something that would probably also provide benefits like a light spray product. However, will it attract a larger share of the casual market and the apparel market ?

These are two areas where they can definitely grow.

The other is golf. Golf is really interesting because I think golf needs another player like On , who will bring the shoes and the clothes. I don't think we'll see On's golf clubs on the market anytime soon.

But this is another high- end market with a target market similar to their casual product target market. Therefore, it makes sense to enter these two markets. Soccer might expand the market a bit because it will likely be more international , but not as highly valued as golf.

Golf is moving deeper into that high- end market. You're clearly adding another game, but also penetrating deeper into the premium market, especially in the US and Europe. So, I like that they are moving forward in both of these areas.

I think this is the right strategic move for them.

Now, buybacks or share repurchases are a very attractive proposition for them, because it is a bold move and they have maintained a strong balance sheet over the past few years.

Naturally, they are now leaning more towards share repurchases, and looking at the balance sheet, this seems very logical. $1.6 billion, that's the cash US dollars on their balance sheet.

So, they have enough money to do this buyback very quickly.

I have added their lease calculation here. Since they have added more stores , as I said, 100 stores, they have had to take out a lot more leases and these will be on the balance sheet.

So, this is a future obligation. This is not a loan, but it will be considered an operating expense. So, you're looking at about $700 million in future lease obligations.

But let's hide it and look at free cash flow, because that's another important part. We have now reached a point where 'ON' is consistently generating positive free cash flow. It's not a straight line going up, but it's a continuous number and remember, free cash flow also includes changes in inventory.

Therefore, inventory changes are shown here in red. It is natural that as a company grows, their inventory also increases. So, inventory is a negative for their balance sheet. This is negative for their free cash flow statement.

This is one of the reasons why 'ON' has continued to grow as a company while maintaining positive net income and positive free cash flow , which is very impressive. This is very difficult to do in the consumer goods market , as you have to spend on sales and marketing and spend money on inventory and infrastructure to expand the business.

So, taking all this into account and considering the price-to- earnings multiple currently at 20 and close to 16 on a forward basis, management expects to grow at a compound annual growth rate of 20 percent on a constant currency basis by the end of the decade.

In my opinion, this is a great company and a great stock for long-term investors. This is why I have been consistently buying shares of On for the past few years.

This year, however, the situation was not so good. As I said, the share price was down more than 40 percent at the start of trading this morning. But when shares of these companies are available at reasonable prices , have the potential for revenue growth, margin expansion, and multiple expansion , that's when it's actually the right time to buy them.

If this stock's price- to-earnings multiple reaches 30, the number of shares outstanding decreases, and revenue and earnings continue to grow , it could deliver 10x returns over the next decade.

Don't underestimate On's popularity, ability to set product prices, and ability to enter new markets. There is no way to ignore the opportunities they can create when it comes to clothing and accessories.

Here, shoe revenue is shown in blue, clothing in orange, and affiliate revenue in purple. As you can see , shoe sales account for more than 90 percent of their total revenue. If they focus more on the apparel and accessories category, they could grow at 30, 40, or 50 percent annually for a few years and still not be a very large part of the business.

So , there's a lot to like about On Stock. I think that's a big reason why stock prices are rising today , because investors are thinking, "Who knows, maybe it's right." "The management actually sees a pretty bright future.

" It may not have looked like this a few weeks ago, especially in 2026 when many consumer goods companies were under a lot of pressure. However, it seems that On is increasing its market share.

They are moving faster than many of their competitors and are now buying back their own shares. These are good signs for long-term investors.