3 High P/E Stocks Justified by Future Upside Potential
All valuations—whether in stocks, real estate, or any business that generates cash flow—are ultimately based on expectations for future growth. Understanding that simple truth helps investors avoid one of the most common mistakes in the market: judging valuations based on opinion rather than on what the data and price action are signaling.
Labeling a stock as “expensive” just because it carries a high price-to-earnings (P/E) ratio is a habit many retail investors fall into while chasing value. In reality, a P/E ratio says little about whether a stock is truly expensive or cheap without considering its growth trajectory. To value a company correctly, investors must weigh price against growth—and that’s exactly the exercise this analysis will walk through today.
By considering names like Roku Inc. (NASDAQ: ROKU), Spotify Technology (NYSE: SPOT), and On Holding (NYSE: ONON), investors can see that a high P/E multiple doesn’t look all that bad when considering present and future growth potential, mainly when those forecasts are rooted in a sound fundamental reality in both the business and the broader industry in which it operates.
Roku’s Growing Market Share Pushes EPS Higher
Looking at Roku’s latest quarterly earnings announcement, investors can see that a seven-cent EPS was reported, which, while not the largest number, is a significant swing from the consensus forecast of a 16-cent net loss. This unexpected swing can be seen through two lenses moving forward, both of which justify the high P/E multiple in Roku.
First, it shows that Roku can drive growth even as consumers remain cautious about spending and subscription costs. Second, it underscores the company’s expanding market share in the competitive streaming space—momentum that has reshaped how Wall Street values the stock.
Reflecting that shift, Matthew Condon of JMP Securities recently set a $145 price target for Roku, well above the $101.33 consensus. That outlook better aligns with the company’s potential to generate higher earnings as its platform scale and ad revenues continue to strengthen.
This bold call implies that Roku can rally by 40% from its current trading price, not to mention reaching a new 52-week high, which could trigger significant new institutional buying based on these momentum strategies. All told, investors can view Roku as a strong growth engine with an expanding market share, trading at a high P/E, with a market that accepts this as a deserved premium, leading to more upside potential.
Institutions Like Spotify’s Subscription Safety
In a market with questionable valuation multiples like today’s, big investors often begin hunting for businesses that aren’t necessarily cheap, but rather ones that, if they’re going to join the rest of the market in having high P/Es, can at least justify this valuation through sound fundamentals.
Spotify is one of these companies, as the business itself relies on a very predictable and stable source of revenue: subscriptions. Although the consumer discretionary sector is not currently the strongest, nothing can detract from the quality of Spotify’s strength, both in its business model and in offering a “sticky” service.
This justification for the rest of the market’s high valuation is why, despite now trading at a forward P/E multiple of 66.2x, institutional buyers from Bamco Inc. decided to still buy an additional 5.6% of their Spotify stock holdings in August 2025, bringing their net position to a high of $719.2 million today.
These buyers weren’t the only ones willing to express their optimism in Spotify, though, as Argus analyst Joseph Bonner initiated coverage on the stock with a $845 price target, calling for 24% upside potential from its current trading price.
On Holding’s New Growth Engine Makes Up for a High P/E
This sportswear brand has achieved a transition that many of its competitors struggle with—expanding from a retail-focused model to one with meaningful wholesale exposure. This shift is expected to strengthen gross margins and improve operating leverage, leading to a direct boost in earnings per share (EPS) in the coming quarters.
This shift is already well underway for On Holding, and the market has taken notice. Its forward P/E ratio of 63.8x reflects expectations for accelerated growth as the company expands deeper into wholesale distribution. Investors are paying a premium for that future earnings potential—and for good reason.
Analysts share that optimism. The Wall Street consensus price target for On Holding stock sits at $64.20 per share, implying roughly 52.5% upside from current levels. As the wholesale model continues to lift margins and earnings power, more analysts are likely to revise their targets higher to capture this next stage of growth.
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