Amer Sports Reports Strong 2025 Growth, But Valuation and China Risks Loom Large

What happened

Amer Sports announced its fourth quarter and fiscal year 2025 financial results, highlighting a breakout year with robust performance. The company reported 27% revenue growth and over 150 basis points of operating margin expansion, led by flagship brands Arc'teryx and Salomon surpassing $2 billion in sales. However, the DeepValue report underscores that the stock trades at elevated valuations, with a P/E of 74.1x and EV/EBITDA of 37.5x, pricing in flawless execution amid high expectations. Key vulnerabilities persist, including heavy reliance on Greater China demand, inventory growth outpacing revenue at 28% year-over-year, and substantial financial obligations such as debt and derivatives. While management provides a positive 2026 outlook, the underlying risks from concentration and balance sheet pressures demand critical scrutiny beyond the promotional headlines.

Implication

The strong performance reinforces the momentum narrative but fails to address core concerns about sustainability and margin safety outlined in the DeepValue report. Valuation remains stretched, limiting upside unless growth continues to exceed already elevated expectations, while downside risks are amplified by China dependency and inventory bloat. Critical monitoring points include Greater China growth trends, inventory normalization without promotions, and refinancing of short-term China facilities maturing in 2025. In the base scenario, the stock is fairly valued at $40, but bear case risks could drive it to $28 if China demand weakens or margins compress due to discounting. Prudent investors should wait for a pullback to the attractive entry point of $32 or until clear signs of risk mitigation, such as sustained China growth above 30% and inventory discipline, emerge.

Thesis delta

The new results confirm the company's operational momentum but do not alter the fundamental thesis of high risk and limited margin of safety, as the positive news is already priced into the stock at current levels. The DeepValue report's 'POTENTIAL SELL' rating remains valid, with no shift in investment stance warranted, as underlying vulnerabilities in China concentration and financial obligations persist unchanged.