The markets were closed yesterday in observance of the Memorial Day holiday. On Friday, Amer Sports (AS) closed the day down 1.2%, but up nearly 18% on the week. 

The maker of Salomon ski equipment, Wilson tennis racquets, and several other prominent sporting goods brands is on a big-time roll. 

As a result, it finished the day in the 45th spot on Barchart’s Top 100 Stocks to buy list. More importantly, the sports stock is up 266% since its February 2024 IPO, an annualized return of 200%. 

Investors who bought IPO shares at $13 have done well. That’s especially true given Amer priced its shares below the pre-IPO $16-$18 pricing. 

I’ve followed this company for what seems like forever. I believe I first wrote about it in 2012 for another publication. 

At the time, it owned Precor, a maker of treadmills and ellipticals for fitness clubs. Amer sold the business to Peloton Interactive (PTON) for $420 million in 2020. That was a smart move. It’s challenging to make a profit in the commercial fitness equipment industry.  

Generally, I like Amer’s business. The sporting goods industry delivers stable, if not spectacular, growth. 

However, its share price has gotten ahead of itself. If you bought shares in the IPO, here’s why you might consider taking some profits. 

There are Better Options

In January, I compared Amer Sports with On Holding (ONON), two sports stocks hitting all-time highs. Both had doubled in price over the previous 12 months. The former is up 20% in the four months since, while the latter’s moved sideways. 

On reported Q1 2025 results on May 13. The shares bounced higher on the positive news. Otherwise, it would be trailing Amer badly on a year-to-date basis. 

The Swiss athletic footwear innovator raised its guidance for the year. It now expects sales to grow by 28% over 2024 to $3.4 billion based on a healthy order book. In terms of profitability, it expects a 60.25% gross margin at the midpoint of its guidance, along with an EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of 17.0%. 

Despite cutting its gross and EBITDA margins slightly for 2025, its sales growth is intact, which suggests On’s story remains a good one. 

As I wrote in January, On had higher revenue growth than Amer, a higher return on capital, and a lower total debt-to-EBITDA ratio. Only its valuation skewed higher for both EV/Revenue and EV/EBIT profits. 

 Here’s how they compare today.

	On Holding	Amer Sports
EV/LTM Revenue	5.65x	3.04x
3-Year Annualized Revenue Growth (2022-2024)	45.7%	19.1%
EV/ LTM EBIT	60.80x	32.79x
Total Debt/EBITDA	1.1x	1.8x
Return on Capital	9.6%	5.5%

  Source: S&P Global Market Intelligence

Not much has changed. ONON remains the one with a higher return on capital, a lower total debt-to-EBITDA ratio, while its valuation is higher for both EV/Revenue and EV/EBIT profits. 

How About Profitability?

Amer’s Q1 2025 results, which it reported last Tuesday, were very healthy. Revenues were up 23% year-over-year, while its adjusted gross margin increased 350 basis points to 58.0%, and its adjusted operating profit increased 79% from Q1 2024. 

There is no question that the business is operating at a high level of efficiency. That’s the good news. The bad news is that it will be tough to extract much more topline and bottom-line growth from Amer’s business. 

In 2025, management expects revenues to grow by 16% at the midpoint of its guidance with a 56.75% gross margin and 11.75% operating margin.

Based on the 2024 revenue of $5.18 billion, its operating profit is projected to increase by 22% in 2025 to $706.4 million, up from $ 577 million, with approximately $1 billion in EBITDA. 

That’s all good. 

I’m just not sure you want to be paying 21.6x EBITDA at a time when tariffs remain a big question mark for both Amer and On. 

A Trio of Numbers

One of the things I often do when comparing competing businesses is to assess their valuation in relation to their financial health. A strong balance sheet is always desirable for a company to navigate difficult times.

While you wouldn’t know it given how the markets have performed in the past month, the global economic order is still very much up in the air. It won’t take much to derail the near-term bull market. 

I’ve always liked Joel Greenblatt’s Magic Formula, which ranks stocks based on two metrics: Earnings Yield (EBIT/EV) and Return on Capital (EBIT/(Net Fixed Assets + Working Capital).

I add a third metric, the Altman Z-Score, a financial metric that predicts the likelihood of a company entering bankruptcy proceedings in the next 24 months. A score below 1.81 indicates that this will likely occur. 

The trio of metrics tells me where I should look more closely. It’s essential to note that all three of these metrics change in real-time, so things can improve or worsen as they report quarterly results. 

Earlier, I detailed the return on capital for both companies. On’s was superior to Amer. 

Amer’s Altman Z-Score is 4.58, according to Gurufocus.com. On Holdings’ is 12.61, almost 3x higher.   

Based on Amer’s trailing 12-month EBIT profit of $576.2 million with an enterprise value of $21.65 billion, its earnings yield is 2.6%, 100 basis points higher than On Holdings. 

The Bottom Line

Both companies offer excellent products. Amer Sports is a more diversified sporting goods business. That doesn’t necessarily mean it’s the better stock. 

On Holdings continues to scale its global footwear business. As it does, EBIT profits will rise, and it will grow into its earnings yield.   

It was the better of the two stocks in January. Given Amer’s appreciation in 2025, it’s an even better bet in the second half of the year.   

Despite being in Barchart’s top 100 stocks to buy, I see AS stock cooling off in the second half of the year. Profit-taking is in order. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.