Is ON Stock Pricing In Too Much Optimism After Its Recent Double Digit Rebound?

• If you are wondering whether ON Semiconductor is quietly turning into a value opportunity, or if the market is still pricing in too much optimism, this article will walk through what the numbers are really saying.
• The stock has bounced sharply in the short term, with gains of 15.1% over the last week and 18.4% over the last month, even though it is still down 7.4% year to date and 13.1% over the past year.
• That move comes against a backdrop of renewed enthusiasm around power management and automotive chips, as investors refocus on companies tied to electric vehicles, industrial automation, and energy efficiency. ON has also been in the spotlight as chipmakers reprioritize capital spending and long term supply deals in these areas. This is shaping how the market thinks about its growth runway and risk profile.
• Despite that excitement, ON Semiconductor currently scores just 0/6 on our valuation checks. In the sections that follow we will unpack what that means across different valuation methods and, by the end, explore an even more powerful way to think about what the stock is truly worth.

ON Semiconductor scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: ON Semiconductor Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, estimates what a company is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in dollar terms.

For ON Semiconductor, the model uses a 2 Stage Free Cash Flow to Equity approach. The company generated about $989 million in free cash flow over the last twelve months, and analyst forecasts point to this rising toward roughly $2.3 billion by 2029. Beyond the explicit analyst window, Simply Wall St extrapolates cash flows out to ten years, with growth gradually moderating to reflect a more mature business profile.

When all those projected cash flows are discounted back, the DCF model estimates an intrinsic value of about $55.30 per share. Compared to the current market price, this suggests ON Semiconductor is roughly 3.3% overvalued, which is effectively a rounding error in valuation terms and well within a normal margin of uncertainty.

Result: ABOUT RIGHT

ON Semiconductor is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for ON Semiconductor.

Approach 2: ON Semiconductor Price vs Earnings

For profitable businesses like ON Semiconductor, the price to earnings ratio is a useful way to see how much investors are paying today for each dollar of current earnings. It links directly to near term profitability, which is what often drives share prices in the medium term.

In practice, what counts as a fair P E depends on how fast earnings are expected to grow and how risky those earnings are. Higher growth and more predictable cash flows can justify a higher multiple, while slower or more volatile earnings usually deserve a lower one. ON currently trades on a P E of about 72.1x, which is well above both the broader Semiconductor industry average of roughly 37.6x and the peer group average of around 33.9x.

Simply Wall St also calculates a Fair Ratio for each company, which is the P E multiple you would expect once you factor in its earnings growth outlook, margins, risk profile, industry, and market cap. Because it blends all of these into one number, it is more tailored than simply comparing ON to its sector or a basket of peers. ON Semiconductor’s Fair Ratio is 58.2x, meaning the current 72.1x suggests the shares are trading at a premium to what its fundamentals justify.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your ON Semiconductor Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are essentially your story about a company, translated into specific assumptions for future revenue, earnings, margins, and ultimately a fair value estimate.

A Narrative links three things together in a simple, structured way: the business story you believe, the financial forecast that follows from that story, and the fair value that falls out of those numbers, so you can clearly see how your view of ON turns into a price you are willing to pay.

On Simply Wall St, Narratives are an easy tool built into the Community page, used by millions of investors to capture their perspective, compare it to others, and immediately see whether their Fair Value is above or below the current share price to help guide investment decisions.

Because Narratives update as new information arrives, such as earnings results or buyback announcements, an optimistic ON view might currently support a fair value near $70 while a more cautious Narrative could land closer to $40, and the platform keeps both of those perspectives dynamically in sync with the latest data.

Do you think there's more to the story for ON Semiconductor? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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