ON SEMICONDUCTOR (NASDAQ:ON) – A Potentially Undervalued Stock with Solid Fundamentals

ON SEMICONDUCTOR (NASDAQ:ON) was identified as a decent value stock by our screener, which looks for companies with strong valuation metrics while maintaining reasonable profitability, financial health, and growth. The stock appears attractively priced relative to its fundamentals, making it a candidate for value investors. Below, we examine why ON stands out.

Valuation

ON scores a 7 out of 10 in valuation, indicating it is priced below many of its peers. Key points include:

• P/E ratio of 12.58, well below the industry average of 46.92 and the S&P 500 average of 26.35.
• Price/Forward Earnings of 13.67, cheaper than 81.82% of semiconductor industry peers.
• Enterprise Value/EBITDA and Price/Free Cash Flow ratios are also favorable, ranking better than 86% and 91% of competitors, respectively.

Profitability

The company earns an 8 out of 10 in profitability, supported by:

• Return on Invested Capital (ROIC) of 9.62%, outperforming 80% of industry peers.
• Operating Margin of 20.11%, above 78.18% of competitors.
• Consistent profitability over the past five years, with positive earnings and cash flow.

Financial Health

ON’s financial health scores a 7 out of 10, reflecting stability:

• Current Ratio of 4.95 and Quick Ratio of 3.32 indicate strong liquidity.
• Debt-to-Equity ratio of 0.42 suggests manageable leverage.
• Altman-Z score of 4.18 signals low bankruptcy risk.

Growth

While growth is more moderate (4 out of 10), there are positive aspects:

• Long-term EPS growth of 21.88% annually, though recent declines (-31.68% YoY) weigh on the score.
• Expected future EPS growth of 10.02%, indicating recovery potential.

Our Decent Value screener lists more stocks with similar characteristics.
For a deeper dive, review the full fundamental report for ON SEMICONDUCTOR.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.