ON Semiconductor (ON) Is Today's Perilous Reversal Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified ON Semiconductor ( ON) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified ON Semiconductor as such a stock due to the following factors:

  • ON has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.1 million.
  • ON has traded 3.2 million shares today.
  • ON is down 3% today.
  • ON was up 5.8% yesterday.

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More details on ON:

ON Semiconductor Corporation manufactures and sells semiconductor components for various electronic devices worldwide. It operates in four segments: Application Products Group, Image Sensor Group, Standard Products Group, and System Solutions Group. ON has a PE ratio of 27.5. Currently there are 8 analysts that rate ON Semiconductor a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for ON Semiconductor has been 7.0 million shares per day over the past 30 days. ON Semiconductor has a market cap of $5.1 billion and is part of the technology sector and electronics industry. Shares are up 16.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ON Semiconductor as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenues rose by 20.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $162.50 million or 27.95% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.93%.
  • 40.28% is the gross profit margin for ON SEMICONDUCTOR CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.06% is in-line with the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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