What happened

Shares of On Holding (ONON 2.96%) were moving higher this week after the running shoe company delivered strong results in its fourth-quarter earnings report. 

As of the close of trading Thursday, shares of the Swiss brand known as On Running were up by about 42% for the week according to data from S&P Global Market Intelligence, as it also gained in the aftermath of the Fed's rate hike announcement on Wednesday.

So what

On Holding demonstrated accelerating sales growth in the fourth quarter, with revenue jumping 91.9% year over year to $400.5 million. Estimates weren't available for comparison, but analysts were clearly impressed by the report. UBS called the results exceptional and a number of analysts raised their price targets following the release.

On Holding saw strong growth in both its direct-to-consumer channel, where sales rose 76.4%, and its wholesale channel, where sales jumped 104.3%. 

Growth was also well-rounded geographically, jumping by at least 80.6% in all four of its regions. In North America, which provides two-thirds of sales, revenue rose 81.5%.

Gross margin reached 58.5% -- an especially high level for an apparel brand -- as the company benefited from normalizing freight costs.

On the bottom line, adjusted earnings before interest taxes depreciation, and amortization (EBITDA) surged by 451.7% to $67.5 million, giving it an adjusted EBITDA margin of 16.8%. It finished the quarter with adjusted earnings of $0.02 per share compared to a loss of $0.04 per share in the year-ago quarter.

Co-CEO Martin Hoffman summed up the quarter, saying, "After a great year and exceptionally strong fourth quarter well beyond our own expectations, we are heading into 2023 with a lot of momentum and in a position of strength."

The stock jumped 26% on Tuesday when the report came out, then gained another 12% on Thursday, in part in light of the Fed's forecast that it will only raise the benchmark federal funds rate one more time in 2023.

Now what

On Holding's guidance was also encouraging. The company expects revenue growth of 39% in 2023, or 42% in currency-neutral terms. It also sees gross margin holding steady from the fourth quarter at 58.5%, and forecasts an adjusted EBITDA margin of 15%. 

The footwear company's shares are still down from their post-IPO peak in 2021, but it's easy to see why they are rallying this week. Still, with a market cap of $9.5 billion and minimal profits, the stock does look pricey. To deliver strong returns for investors from here, the company will have to fulfill its promise as a disruptor.