It's been a great afternoon session for ON Semiconductor investors, who saw their shares rise 7.4% to a price of $83.33 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
ON Semiconductor Is Potentially Undervalued:
ON Semiconductor Corporation provides intelligent sensing and power solutions in the United States and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 35.0 and an average price to book (P/B) ratio of 7.92. In contrast, ON Semiconductor has a trailing 12 month P/E ratio of 17.0 and a P/B ratio of 4.57.
ON Semiconductor's PEG ratio is 4.04, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Strong Revenue Growth but Slimmer Gross Margins to the Industry Average of 54.23%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $5,878 | $5,518 | $5,255 | $6,740 | $8,326 | $8,338 |
| Gross Margins | 38% | 36% | 33% | 40% | 49% | 48% |
| Net Margins | 11% | 4% | 4% | 15% | 23% | 27% |
| Net Income (M) | $627 | $212 | $234 | $1,010 | $1,902 | $2,225 |
| Net Interest Expense (M) | $128 | $148 | $168 | $130 | $95 | $86 |
| Depreciation & Amort. (M) | $509 | $593 | $625 | $597 | $552 | $582 |
| Diluted Shares (M) | 436 | 416 | 419 | 444 | 448 | 451 |
| Earnings Per Share | $1.44 | $0.51 | $0.56 | $2.27 | $4.25 | $4.96 |
| EPS Growth | n/a | -64.58% | 9.8% | 305.36% | 87.22% | 16.71% |
| Avg. Price | $21.73 | $20.41 | $21.28 | $44.35 | $58.0 | $83.97 |
| P/E Ratio | 14.68 | 39.25 | 37.33 | 18.71 | 13.21 | 16.27 |
| CAPEX (M) | $515 | $535 | $384 | $445 | $1,005 | $1,527 |
| EV / EBITDA | 8.3 | 11.58 | 12.11 | 10.79 | 8.77 | 11.54 |
| Total Debt (M) | $3,078 | $4,410 | $4,121 | $3,419 | $3,376 | $3,500 |
| Net Debt / EBITDA | 1.48 | 3.43 | 3.12 | 1.1 | 0.16 | 0.26 |
| Current Ratio | 2.16 | 1.66 | 1.9 | 2.45 | 2.78 | 2.44 |
ON Semiconductor has rapidly growing revenues and increasing reinvestment in the business and exceptional EPS growth. Additionally, the company's financial statements display an excellent current ratio of 2.44 and healthy leverage levels. However, the firm has slimmer gross margins than its peers.
