Key Points
Netflix and On Holding are trading at reasonable valuations, while Wall Street analysts expect more than 20% annualized earnings growth.
Netflix still captures only about 7% of a $670 billion addressable market.
On is building a highly profitable global footwear brand, while the stock trades at an attractive valuation of 16 times forward earnings estimates.
Netflix (NASDAQ: NFLX) and On Holding (NYSE: ONON) offer attractive setups for market-beating returns. Both companies are showing strong brand power and double-digit revenue growth despite a challenging backdrop for consumer spending, with higher gas prices and interest rates.
Just as important, both stocks trade at reasonable forward price-to-earnings (P/E) multiples, and analysts expect more than 20% annualized earnings growth in the years ahead. That's a compelling mix for investors willing to hold through near-term volatility over the next five years.
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Netflix
Netflix shares are down 42% from their 2025 all-time high. That reflects soft third-quarter guidance, with management saying it expects revenue to rise 12% year over year, following 16% growth in the first quarter and 13% in the second.
But Netflix should continue to grow for many years. It's an entertainment juggernaut with relatively low penetration worldwide. On the Q2 earnings call, CFO Spencer Neumann said it has penetrated less than 45% of the roughly 800 million households it could reach worldwide. That's an opportunity estimated at $670 billion, according to the company, leaving plenty of runway for Netflix to grow its trailing-12-month revenue from $49 billion.
Management expects 2026 revenue to rise 13% to 14% from the prior year, driven by continued membership growth, higher pricing, and advertising. Neumann said the underlying trends remain solid: "We continue to see healthy acquisition and retention trends on the membership side, and our recent price adjustments are going well on the pricing side."
For the stock to double, Netflix needs to sustain double-digit revenue growth, which looks achievable given its low market penetration. It should also see strong earnings growth from higher margins. Content expense is forecast to rise just 10% in 2026 -- below expected revenue growth -- and that dynamic can drive higher earnings growth than revenue over the long term.
I'd expect the stock's forward P/E to hold at least around 20, which is reasonable for a subscription business of this quality. If Netflix delivers on the 21% earnings growth consensus, the stock has a clear path to at least double in five years.
On Holding
On Holding stock is down 57% from its all-time high in early 2025. Revenue growth has slowed amid softer consumer spending, but the long-term trajectory of this footwear brand could support excellent returns for investors.
The brand is continuing to gain share against industry leaders like Nike, which is struggling to find growth in this environment. In the second quarter of 2026, sales rose 21% year over year on a currency-neutral basis, although that's below the 35% growth for the full year in 2025.
Part of the lower growth this year is management's choice not to chase volume through discounting. As Founder and co-CEO David Allemann explained on the Q2 earnings call: "We are not sprinting for short-term volume. We are deliberately engineering for the multidecade value of a premium brand."
That discipline shows up in profitability: Gross margin rose to 65.4% in Q2 2026 from 61.5% a year earlier, even after absorbing higher U.S. import tariffs.
Overall, On Holding is avoiding the inventory and discounting issues that weighed on Nike's financial performance. On Holding expects full-year sales growth in the low-20% range, signaling resilient demand and increasing brand appeal.
This business is built to win market share through innovation and engineering -- not by lowering prices -- and that could lead to strong earnings performance over the long term. The stock trades at around 16 times forward earnings, while analysts expect earnings to grow at a 24% annualized rate. That's more than enough earnings growth to double the stock in five years.
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix, Nike, and On Holding. The Motley Fool has a disclosure policy.