Why ON Semiconductor (ONNN) Is a 'Hold'

NEW YORK (TheStreet) -- TheStreet Ratings team has reiterated its "hold" rating for ON Semiconductor (ONNN) with a ratings score of C-, despite recent spikes in the stock.

Shares of ON Semiconductor increased 4.8% to $8.48 Wednesday.

The semiconductor company gained 8.3% in the past month, and 10.4% over the past year. The stock hit a yearlong high of $8.68 on Feb. 14, 2013, and a low of $6.83 on Oct. 9, 2013. More than 14 million shares of ON Semiconductor changes hands on Wednesday, well above the daily average volume of 6 million shares.

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TheStreet Ratings team rates ON Semiconductor as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ON SEMICONDUCTOR CORP (ONNN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 314.4% when compared to the same quarter one year prior, rising from $12.50 million to $51.80 million.
  • Net operating cash flow has significantly increased by 403.36% to $59.90 million when compared to the same quarter last year. In addition, ON SEMICONDUCTOR CORP has also vastly surpassed the industry average cash flow growth rate of -12.49%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • ONNN's debt-to-equity ratio of 0.62 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.14 is sturdy.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ON SEMICONDUCTOR CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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