Footwear makers On Holding (NYSE: ONON) and Crocs (NASDAQ: CROX) have been two of the hottest stocks this year, each with returns of 50% or more.

Here's why I would be buying these two high-flying stocks without hesitation.

On Holding

On Holding is a Swiss footwear and apparel company best known for its Cloud line of performance athletic shoes. Its original focus was on running shoes, but it has since expanded into other areas, including tennis, training, outdoor, and everyday shoes.

The company has been seeing strong growth, as demonstrated by its 28% revenue growth in Q2, which was driven by its popular Cloud running shoes. It is also seeing rapid growth with its Roger line of tennis shoes, and it says its Cloudtilt all-day performance shoes continue to fly off the shelf.

While the company is performing well, it still has a lot of growth in front of it. Its performance running shoes have a strong following among hardcore runners, but its overall brand awareness is still pretty modest across the globe. This represents a huge opportunity for the company. Opening new stores will both increase brand awareness and drive direct-to-consumer sales.

Meanwhile, the bulk of the company's sales are running shoes with other categories still relatively small. It's nicely growing its tennis business as a result of its collaboration with tennis great Roger Federer and recently signed on actress Zendaya to promote its lifestyle offerings. Apparel is growing quickly, with revenue soaring 63% in Q2. However, apparel was still less than 4% of its sales. As On Holding grows its brand, apparel has the potential to become a much larger part of its mix.

The company has been experiencing some distribution challenges as it transitions to a new warehouse in Atlanta. The company expects this transition to allow it up to scale its distribution in the U.S., which should lead to even more robust sales when it solves the distribution problems. The company is also looking to improve its manufacturing efficiency through its new lightspray technology. The new process automates the production of shoe uppers using a robotic arm.

While On Holding trades at a forward price-to-earnings (P/E) ratio of about 38.5 based on next year's analyst estimates, it has a PEG (price/earnings-to-growth) ratio of only 0.8. Any number under 1 typically indicates at stock could be undervalued. Given the opportunities in front of the company, this is an attractive valuation.

Crocs

After a disappointing 2023, Crocs stock has rebounded well thus far in 2024. The company's namesake brand has been a solid performer, though the HeyDudes brand that it acquired in early 2022 has not.

On the Crocs side of its business, the company continues to have several solid opportunities, including its continued expansion into categories adjacent to its clog business. The sandals category has been a great addition to its lineup and continues to grow, and the company has also experimented with a more sneaker-like shoe.

The company also continues to introduce new partnerships to help fuel growth. Through collaborations with partners, including several luxury brands, Crocs has also introduced several limited-edition collections that have helped drive interest in the brand.

International expansion, meanwhile, is another potential growth driver. The company is currently eyeing China and India. Its Chinese sales increased by 70% in Q2, and it believes the Chinese market has the greatest long-term potential. Meanwhile, it sees India as a rapidly growing emerging market.

Turning around its foundering HeyDudes business, however, may be the best way for the company to drive growth. Last year, the company sold too much inventory into the wholesale channel, which led to discounting in certain digital channels. The company has been working through this, and it seems the brand should bottom out in Q3. Last month, the brand brought on popular actress Sydney Sweeney to be its global spokesperson.

Trading at a forward P/E of about 10 times next year's analyst estimates, Crocs stock is cheap.

Its core namesake brand continues to put up solid growth, with the company projecting 7% to 9% revenue growth for its revenue this year. And while HeyDudes has been a drag, it has turnaround potential.

Given this, I'd buy with no hesitation, even after the strong rebound this year.

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