Athletic footwear maker On Holding AG (NYSE: ONON) gapped down hard on August 15 after reporting earnings, but like any good shoe, found support that provided stability for investors.

A look at the On Holding chart shows the stock sprinting downhill but finding a floor at its August 23 low of $27.21. In the past three weeks, the stock trended higher along its 10-day moving average. 

On Holdings is a newcomer to a long-established market dominated by big players like Nike Inc. (NYSE: NKE). In addition to shoes, the company also sells athletic apparel and accessories, although footwear accounts for about 95% of its business. 

In regulatory filings, On Holding says competitors across different categories include Nike, Adidas AG (OTCMKTS: ADDYY), Reebok, Under Armour, Inc. (NYSE: UAA), Brooks Sports, Deckers Outdoor Corp. (NYSE: DECK), Asics, New Balance, Lululemon Athletica Inc. (NASDAQ: LULU) and Patagonia. 

Taking Market Share from Bigger Brands

On Holding's On running shoes, which include the Cloudmonster, Cloudrunner and Cloudgo models, have snagged a growing market share from many of the big athletic shoe brands. The company specializes in eye-catching designs and emphasizes sustainability through its use of materials and high-performance specifications.

That combination of factors has caught the attention of celebrity investors, including Roger Federer and Gisele Bundchen, and big-money institutions have been piling in. MarketBeat's On Holding institutional ownership data show 193 big buyers accounting for $1.21 billion in inflows in the past 12 months versus 77 sellers accounting for $654.34 million in outflows. 

So what happened to cause the downdraft in August?

To answer that, let's look at the most recent quarterly revenue and earnings. The company earned 4 cents a share on revenue of $496.2 million. That was a decrease of 70% on the bottom line and an increase of 62% on the top line. 

As you can see on MarketBeat's On Holdings earnings page, net income missed views, but revenue came in well ahead of expectations.

However, analysts and investors were concerned about inventories, which rose in the first six months of the year. They also expressed worries about On's sales, general and administrative expenses, including marketing, which also increased.

Investors Not Swayed by Higher Sales Forecast

The company raised full-year sales guidance, but investors weren't particularly impressed, sending shares 14% lower in enormous trading volume. But the decline seems to offer a buying opportunity for On Holding stock. 

Wall Street still expects earnings to increase by 54% this year and 48% next year, and MarketBeat's On Holding analyst ratings show a consensus view of "moderate buy" with a price target of $32.95, an upside of 8.42%.

When it comes to concerns about the inventory, investors initially fretted that that might indicate the shoes are less popular with a fickle public. Still, given the upbeat forecasts, that doesn't seem to be the case. 

Frequently, after a stock posts a strong rally, investors use any excuse to pocket some profits. It's possible some of that was happening with On Holding, whose share price had more than doubled from its October low of $15.44 before the selloff.

It’s still up 96% from that point, meaning investors who have held for the past several months are still in the black. 

Stock Price Outrunning Other Footwear Makers

Within its sub-industry of apparel and shoes, On's price performance is outpacing peers, including Deckers, Adidas, Skechers U.S.A. Inc. (NYSE: SKX) and Crocs Inc. (NASDAQ: CROX).

When it comes to earnings growth, the company has performed well since going public, but a pre-IPO loss of 2 cents a share in 2020 means it doesn't yet have a three-year earnings growth rate. Revenue, though, grew by 70% during that time. 

Watch for the company to continue growing, as analysts expect. One pillar of its growth strategy is further expansion into global markets. North American sales currently total about 60% of revenue, but On is expanding into Asia, where sales grew by 90% in the first six months of the year.