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Bull of the Day: ON Semiconductor (ON)

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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.

Overall Outperformer

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.

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