We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should Value Investors Consider Onsemi (ON) Stock?
Read MoreHide Full Article
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Onsemi (ON - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Onsemi has a trailing twelve months PE ratio of 12.3, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 17.5. If we focus on the long-term PE trend, Onsemi’s current PE level puts it below its midpoint (which is 15.64) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the Zacks Computer & Technology sector’s trailing twelve months PE ratio, which stands at 20.14. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Onsemi has a forward PE ratio (price relative to this year’s earnings) of just 11.89, so it is fair to say that a slightly more value-oriented path may be ahead for Onsemi stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Onsemi’s PEG ratio stands at just 0.59, compared with the Zacks Semiconductor - Analog and Mixed industry average of 0.88. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Image Source: Zacks Investment Research
Broad Value Outlook
In aggregate, Onsemi currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Onsemi a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Onsemi is just 0.58, a level that is far lower than the industry average of 0.73. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, ON is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Onsemi might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of B. This gives ON a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been robust at best. The current quarter has seen six estimates go higher in the past sixty days compared to five lower, while the full year estimate has seen fourteen up and none down in the same time period.
This has had a noticeable impact on the consensus estimate though as the current quarter consensus estimate has risen by 0.8% in the past two months, while the full year estimate has increased by 2.9%.
Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.
Bottom Line
Onsemi is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, a strong industry rank (among Top 39% of more than 250 industries) instills our confidence. In fact, over the past two years, the Zacks Semiconductor - Analog and Mixed industry has clearly outperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
See More Zacks Research for These Tickers
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Should Value Investors Consider Onsemi (ON) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Onsemi (ON - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Onsemi has a trailing twelve months PE ratio of 12.3, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 17.5. If we focus on the long-term PE trend, Onsemi’s current PE level puts it below its midpoint (which is 15.64) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the Zacks Computer & Technology sector’s trailing twelve months PE ratio, which stands at 20.14. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Onsemi has a forward PE ratio (price relative to this year’s earnings) of just 11.89, so it is fair to say that a slightly more value-oriented path may be ahead for Onsemi stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Onsemi’s PEG ratio stands at just 0.59, compared with the Zacks Semiconductor - Analog and Mixed industry average of 0.88. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Image Source: Zacks Investment Research
Broad Value Outlook
In aggregate, Onsemi currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Onsemi a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Onsemi is just 0.58, a level that is far lower than the industry average of 0.73. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, ON is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Onsemi might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of B. This gives ON a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been robust at best. The current quarter has seen six estimates go higher in the past sixty days compared to five lower, while the full year estimate has seen fourteen up and none down in the same time period.
This has had a noticeable impact on the consensus estimate though as the current quarter consensus estimate has risen by 0.8% in the past two months, while the full year estimate has increased by 2.9%.
Despite this positive trend, the stock has a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term.
Bottom Line
Onsemi is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, a strong industry rank (among Top 39% of more than 250 industries) instills our confidence. In fact, over the past two years, the Zacks Semiconductor - Analog and Mixed industry has clearly outperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.