ON

Based on the provided data, here is a comprehensive analysis of ON Semiconductor (ON).

Technical Analysis ON exhibits strong bullish momentum, significantly outperforming the market over the last three months. Trading near the top of its 52-week range, the stock has recovered sharply from its lows. While its high beta indicates increased volatility, the current price does not appear overbought, suggesting room for continued upward movement.

Fundamental Analysis The company's fundamentals are robust, showing sequential improvement in revenue and a material expansion in net income. Financial health is a key strength, with a very strong liquidity position and manageable leverage. A relative weakness is operational efficiency, particularly a lengthy cash conversion cycle due to high inventory, which indicates an area for potential improvement.

Valuation & Risk Valuation presents a mixed picture with a very high trailing P/E but a much more reasonable forward P/E, supported by an attractive PEG ratio signaling growth potential. The primary risk is volatility, as the stock's high beta implies it will experience larger swings than the market. Investors must be comfortable with this inherent price fluctuation.

Recommendation

ON Semiconductor presents a compelling growth opportunity, supported by strong financials and positive momentum. The current valuation is justified if the company delivers on its high earnings growth expectations, as signaled by the low PEG ratio. For investors with a higher risk tolerance who believe in the company's growth trajectory and can withstand market volatility, ON is a BUY. This is not investment advice, for reference only.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the comprehensive analysis provided, here is a 12-month outlook for ON Semiconductor (ON):

12-Month Outlook for ON Semiconductor (ON)

Over the next 12 months, ON's performance will be heavily influenced by the continued adoption of its silicon carbide (SiC) and intelligent power solutions in key growth markets like electric vehicles and industrial automation, serving as primary catalysts. The main risks remain heightened volatility due to its high beta and the execution risk of improving operational efficiency to manage its lengthy cash conversion cycle and high inventory levels. Given the lack of a specific analyst target, the target price is highly contingent on the company meeting its forward earnings growth expectations; a reasonable upside range could be 10-20% from the current price, contingent on sustained execution and stable market conditions.

Wall Street Consensus

Most Wall Street analysts are optimistic about ON's 12-month outlook, with consensus target around $60.58, indicating expected upside potential.

Overall, ON has investment potential but also faces challenges. Here are key factors to weigh before investing.

ON has demonstrated exceptionally strong momentum, posting substantial gains across recent timeframes while significantly outperforming the broader market.

The stock shows robust short-term performance with an 18.89% gain over three months, outperforming the market by 15.52%, though its high beta of 1.543 indicates volatility was elevated relative to the market. The consistent positive momentum over one and three months underscores bullish near-term sentiment.

Currently trading at $59.41, ON resides in the upper portion of its 52-week range ($31.04-$63.63), approximately 91% above its low and just 6.6% below its peak. Given the sharp recovery from a 43.21% maximum drawdown, the stock appears to be in an extended phase but not distinctly overbought at current levels.

Revenue & Profitability: ON demonstrated sequential improvement with Q3 revenue reaching $1.55 billion, up from $1.47 billion in Q2. Profitability strengthened materially, as the net income ratio expanded to 16.4% from 11.6% the prior quarter, driven by improved operating leverage and a lower effective tax rate. This indicates effective cost control and a more favorable revenue mix during the period.

Financial Health: The company maintains an exceptionally strong liquidity position, evidenced by a high current ratio of 5.23 and a robust cash ratio of 2.04. ON's leverage is manageable with a low debt-to-equity ratio of 0.46 and a solid interest coverage ratio of nearly 15, suggesting ample capacity to service its obligations. The healthy cash balance provides a significant buffer against market volatility.

Operational Efficiency: Operational efficiency showed improvement, with return on equity (ROE) at 3.2% for the quarter. However, asset utilization remains a relative weakness, as indicated by a low asset turnover of 0.12 and a lengthy cash conversion cycle of 204 days, primarily due to high inventory levels. This signals potential inefficiency in working capital management that could be optimized.

Valuation Level

ON's valuation presents a mixed picture. The trailing P/E of 81.38 is exceptionally high, suggesting significant overvaluation based on current earnings. However, the forward P/E of 19.65 is much more reasonable and indicates market expectations for substantial earnings growth. This is corroborated by a very low PEG ratio of 0.37, which signals the stock is undervalued relative to its growth prospects. The elevated P/S ratio of 5.29 indicates investors are paying a premium for sales, but the P/B of 2.98 is not excessively high for a technology-oriented company. The extremely high EV/EBITDA of 48.51 is a significant concern, pointing to rich valuation on a cash flow basis.

Peer Comparison

A direct peer comparison cannot be performed as the industry average data is not available. Therefore, the analysis relies solely on intrinsic metrics. The low PEG ratio is the most compelling positive signal, strongly suggesting the stock is undervalued when its growth rate is factored in. The high forward earnings growth implied by the disparity between the TTM and forward P/E would need to materialize to justify the current sales and cash flow multiples. Without industry benchmarks, it is prudent to view the valuation with caution, acknowledging the potential for growth but also the risk if that growth fails to meet lofty expectations.

ON exhibits significant volatility risk, with a beta of 1.543 indicating the stock is over 50% more volatile than the broader market. This heightened sensitivity is corroborated by a substantial one-year maximum drawdown of -43.21%, reflecting considerable price erosion during market downturns.

The absence of reported short interest suggests minimal speculative pressure from bearish investors. However, the stock's elevated volatility necessitates careful liquidity management, as the potential for sharp price movements could challenge execution for larger positions despite the lack of short-side concern.