Top Picks 2018: ON Semiconductor (ON)

01/11/2018 5:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

ON Semiconductor (ON), our top pick for the coming year, is a small player in the volatile, highly cyclical semiconductor industry, explains Richard Moroney, editor of Dow Theory Forecasts.

The company makes sensors and power-management components in automotive, industrial, and computing products.

The stock earns a value score of 86 (out of 100) in or proprietary Quadrix ranking system and trades at a substantial discount to the semiconductor group on most valuation ratios.

Given the company’s operating momentum, the appealing valuation is a bit of a surprise. The firm’s sales rose more than 50% and its per-share profits more than doubled over the last year, helped by an acquisition.

Profit margins extended a multiyear uptrend. The company reported solid pricing power and continued strong demand trends in the most recent quarter. Analysts target profit growth of 27% for the December quarter and 15% for 2018.

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