Onto Innovation Inc (ONTO, Financial) has recently experienced a notable daily gain of 10.14%, complemented by a three-month gain of 19.9%. Its Earnings Per Share (EPS) stands at $3.51. These figures bring us to the critical question: is the stock significantly overvalued? To offer a comprehensive answer, we delve into an extensive valuation analysis in the following sections.
Company Introduction
Onto Innovation Inc operates in the high-stakes arena of microelectronics device manufacturing, providing essential control metrology, defect inspection, lithography, and data analysis systems. With a significant presence in the United States, Asia, and Europe, Onto Innovation's largest revenue sources hail from China and South Korea. The company's current market cap is $6.70 billion, with a stock price of $135.55, starkly contrasted against the GF Value's fair valuation of $82.48. This juxtaposition sets the stage for an in-depth exploration of Onto Innovation's intrinsic value.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor for past performance, and future business performance projections. When a stock's price significantly surpasses the GF Value Line, it suggests overvaluation, with poorer future returns expected. Conversely, prices below the line indicate potential for higher returns. At present, Onto Innovation Inc (ONTO, Financial) is deemed significantly overvalued by the GuruFocus Value calculation, with its market cap of $6.70 billion and a stock price of $135.55 far exceeding the GF Value Line.
Due to this significant overvaluation, the long-term return on Onto Innovation's stock is likely to fall short of its future business growth.
Link: These companies may deliver higher future returns at reduced risk.Financial Strength
Investing in companies with robust financial strength minimizes the risk of permanent capital loss. Onto Innovation's financial strength is evident in its impressive cash-to-debt ratio of 31.61, ranking it above 80.42% of its peers in the Semiconductors industry. This financial solidity is reflected in the company's overall financial strength rating of 8 out of 10.
Profitability and Growth
Profitable companies, especially those with a track record of consistent earnings, pose less investment risk. Onto Innovation's profitability is robust, with a 9-year streak of profits and an operating margin of 19.43%, which is higher than 82.16% of the companies in its industry. The company's growth prospects are equally promising, with an average annual revenue growth of 25.6%, placing it above 77.89% of its semiconductor industry competitors. Its 3-year average EBITDA growth rate is a staggering 151.9%, outpacing 97.8% of its industry peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is a crucial measure of profitability. Onto Innovation's ROIC over the past 12 months is 14.48, narrowly below its WACC of 15.07, indicating a slight underperformance in creating shareholder value.
Conclusion
In summary, Onto Innovation Inc (ONTO, Financial) is currently considered significantly overvalued. However, the company's financial health is robust, and its profitability is strong. Additionally, it boasts a growth rate that eclipses 97.8% of other companies in the semiconductors industry. To delve deeper into Onto Innovation's financials, one can examine its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
