ON Semiconductor Corp. ( have been strong performers lately, with the stock up 26.9% over the past month. The stock hit a new 52-week high of $71.98 in the previous session. ON Semiconductor Corp. has gained 4.8% since the start of the year compared to the -19.5% move for the Zacks Computer and Technology sector and the -7.4% return for the Zacks Semiconductor - Analog and Mixed industry. ON Quick Quote ON - Free Report) What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 1, 2022, ON Semiconductor Corp. reported EPS of $1.34 versus consensus estimate of $1.26.
For the current fiscal year, ON Semiconductor Corp. is expected to post earnings of $5.15 per share on $8.26 billion in revenues. This represents a 74.58% change in EPS on a 22.57% change in revenues. For the next fiscal year, the company is expected to earn $5.01 per share on $8.37 billion in revenues. This represents a year-over-year change of -2.62% and 1.3%, respectively.
ON Semiconductor Corp. may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
ON Semiconductor Corp. has a Value Score of B. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 13.8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 15.6X. On a trailing cash flow basis, the stock currently trades at 16.1X versus its peer group's average of 18.3X. Additionally, the stock has a PEG ratio of 0.54. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, ON Semiconductor Corp. currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if ON Semiconductor Corp. fits the bill. Thus, it seems as though ON Semiconductor Corp. shares could have a bit more room to run in the near term.
How Does ON Stack Up to the Competition?
Shares of ON have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is
Microchip Technology Incorporated (. MCHP has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of B. MCHP Quick Quote MCHP - Free Report)
Earnings were strong last quarter. Microchip Technology Incorporated beat our consensus estimate by 2.24%, and for the current fiscal year, MCHP is expected to post earnings of $5.66 per share on revenue of $8.14 billion.
Shares of Microchip Technology Incorporated have gained 18.2% over the past month, and currently trade at a forward P/E of 13.02X and a P/CF of 11.35X.
The Semiconductor - Analog and Mixed industry is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ON and MCHP, even beyond their own solid fundamental situation.