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Here's Why Onto (ONTO) is a Promising Investment Bet Now

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Shares of Onto Innovation Inc. (ONTO - Free Report) have surged 96.8% over the past year, driven by healthy revenues on the back of a flexible business model and solid market response for cost-effective solutions. Earnings estimates for the current and next fiscal year have increased 25.7% and 6%, respectively, since July 2020, implying robust growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) consumer and electronic equipment manufacturer appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Growth Drivers

Headquartered in Wilmington, MA, Onto operates as the leading manufacturer of avant-garde process control tools that perform macro defect inspections and metrology, and lithography systems. As a global leader of process and yield management solutions, the company plays a significant role in the design, manufacture and marketing of process control systems for 2D and 3D macro inspection, optical critical dimension metrology and wafer inspection. It boasts a broad portfolio of leading-edge technologies — metal interconnect composition, factory analytics and lithography for advanced semiconductor packaging — as well as develops innovative analytical software for certain industrial applications.

With state-of-the-art inspection, measurement and data analysis solutions, Onto reduces operating costs and accelerates product and process development. This enables customers to get a first-hand access to premium products at optimum prices. The company has an extensive geographical footprint and supports a diverse range of customers in more than 20 countries. It is one of the few companies that are an end-to-end supplier of products and applications, ranging from un-patterned wafer quality to advanced packaging lithography, with enterprise software solutions spanning across the entire value chain. The company believes that its evolving product portfolio and surging customer base are the cornerstones of its long-term growth across diverse markets.

Onto invests in research and development to provide differentiated products and services, which adds value to its manufacturing processes. Backed by its expertise in core technologies of optics and software, the rapid and ongoing development of new products and enhancements to existing products enable it to quickly respond to dynamic industry trends as well as competitive challenges. It caters to various markets such as Bare Wafer, Image Sensors, Flat Panel Display, Probe Test and RF/MEMS (radio-frequency/microelectromechanical system) among others.

The company has enhanced its product inspection and detection portfolio with the launch of Dragonfly G3 inspection platform. Designed to meet the most advanced 2D and 3D sensitivity requirements for advanced packaging and specialty device manufacturers, the product is likely to be a boon in identifying low contrast defects that hitherto went unnoticed. Notably, the Dragonfly G3 platform offers sub-micron sensitivity for complex packaging designs requiring redistribution lines to the tune of 1µm. Such high-tech product attributes have become more relevant with the growing specialty device market, which includes next-generation power devices, RF filters and amplifiers. These products require impeccable quality standards and process control equipment beyond the capabilities of legacy systems in order to detect smaller and new defect types. The Dragonfly G3 platform perfectly fits the bill with highly sensitive tools, providing repeatable and accurate data for high-precision product materials. The product has already garnered significant interest among customers and resulted in multiple orders from unnamed third-party packaging and test services provider and image sensor manufacturer.  

With a VGM Score of B, the stock delivered a positive earnings surprise of 20.8%, on average, in the trailing four quarters. Onto is housed within the Nanotechnology industry, which carries a Zacks Industry Rank #26, which places it among the top 10% of more than 250 Zacks industries. The stock’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. Consequently, the stock appears to be an enticing investment option in the volatile market.

Other Key Picks

Some other top-ranked stocks in the broader industry are Knowles Corporation (KN - Free Report) and Plantronics, Inc. , sporting a Zacks Rank #1, and Corning Incorporated (GLW - Free Report) carrying a Zacks Rank #2.

Knowles has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 19.3%, on average, in the trailing four quarters.

Plantronics delivered a trailing four-quarter earnings surprise of 560.4%, on average.

Corning has a long-term earnings growth expectation of 2%. It delivered an earnings surprise of 41.6%, on average, in the trailing four quarters.

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