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ON Semiconductor Corp. (ON) Hits 52-Week High, Can the Run Continue?

ON Semiconductor Corp. (ON) is at a 52-week high, but can investors hope for more gains in the future? We take a look at the company's fundamentals fo...

This story originally appeared on Zacks

Shares of ON Semiconductor (ON) have been strong performers lately, with the stock up 1% over the past month. The stock hit a new 52-week high of $46.4 in the previous session. ON Semiconductor has gained 39.7% since the start of the year compared to the 27.7% move for the Zacks Computer and Technology sector and the 21% return for the Zacks Semiconductor - Analog and Mixed industry.

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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 2, 2021, ON Semiconductor Corp. reported EPS of $0.63 versus consensus estimate of $0.49.

For the current fiscal year, ON Semiconductor Corp. is expected to post earnings of $2.5 per share on $6.57 billion in revenues. This represents a 194.12% change in EPS on a 25.11% change in revenues. For the next fiscal year, the company is expected to earn $2.78 per share on $6.86 billion in revenues. This represents a year-over-year change of 11.06% and 4.36%, respectively.

Valuation Metrics

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 has run ahead of itself.

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. The idea behind the style scores is to help investors 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 C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 18.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 19X versus its peer group's average of 28.8X. Additionally, the stock has a PEG ratio of 0.34. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, 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. passes the test. Thus, it seems as though ON Semiconductor Corp. shares could have a bit more room to run in the near term.

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