Arguably the silent, unsung heroes of the technology industry, semiconductors, provide the power needed to fuel computers, smartphones, flat-screen displays, and many other electronic devices.
While it’s a profitable time to be a tech-focused investor in any regard, investors should take a close look at
ON Semiconductor Corp. (. ON - Free Report)
The Zacks Rank #2 (Buy) company is mostly known as a power management and commodity chip maker, but ON has slowly begun to create a budding Internet of Things division.
Its IoT offerings include products catered to wearables, industrial automation, and smart city development, and ON is also heavily involved with automotive solutions.
Solid Third Quarter Outlook
ON is set to report its third quarter fiscal 2017 results on November 6 before the bell.
We currently expect the company to report revenues of $1.37 billion on earnings of 40 cents per share. Earnings estimates were sitting at 37 cents 90 days ago.
Seven analysts have revised their estimates upwards in the last 60 days compared to none lower.
Even though the company has an average surprise of -1.37%, ON anticipates double-digit earnings and revenue growth for the quarter of about 74% and 44%, respectively.
Impressive Growth Fundamentals
With more double-digit earnings growth continuing into next year, it’s no wonder ON stock sports a Growth Score of ‘A.’
Its ROE of 22.7% has significantly improved over the years, suggesting that the company is getting better and better at efficiently utilizing its shareholder funds.
And, its acquisition of Fairchild has helped ON’s top-line growth, and management expects to witness even further growth from this deal driven by the company’s strong foothold in the power semiconductor market post-acquisition.
So far this year, shares of ON have gained over 64% compared to the S&P 500’s return of nearly 15% and the
Semiconductor-Analog and Mixed industry's gain of over 29%.
Even with this surge, shares of ON are pretty cheap. With a forward P/E of 14.8, ON Semiconductor has traded below the S&P 500’s average price-to-earnings for the last year.
Fortunately, the company sits in a well-performing sector as well. The
Computer and Technology sector has gained almost 24% in 2017, demonstrating how strong of an investment the tech industry is right now.
But even among this impressive landscape, ON is a standout. Thanks to its strong growth and value metrics, ON Semiconductor looks to be an exciting opportunity for investors.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades…from value to momentum…from stocks under $10 to ETF and option moves…from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>