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3 Reasons to Sell ONEW and 1 Stock to Buy Instead

By: StockStory

September 23, 2025 at 00:02 AM EDT

ONEW Cover Image

Over the last six months, OneWater’s shares have sunk to $15.96, producing a disappointing 10.5% loss - a stark contrast to the S&P 500’s 16.2% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in OneWater, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is OneWater Not Exciting?

Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons we avoid ONEW and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

Same-store sales is a key performance indicator used to measure organic growth at brick-and-mortar shops for at least a year.

OneWater’s demand has been shrinking over the last two years as its same-store sales have averaged 1.1% annual declines.

2. Low Gross Margin Reveals Weak Structural Profitability

Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.

OneWater has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 24.2% gross margin over the last two years. That means OneWater paid its suppliers a lot of money ($75.77 for every $100 in revenue) to run its business. OneWater Trailing 12-Month Gross Margin

3. High Debt Levels Increase Risk

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

OneWater’s $554.4 million of debt exceeds the $70.15 million of cash on its balance sheet. Furthermore, its 8× net-debt-to-EBITDA ratio (based on its EBITDA of $60.46 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. OneWater could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope OneWater can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

Final Judgment

OneWater isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 11.1× forward P/E (or $15.96 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.

Stocks We Would Buy Instead of OneWater

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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