ON Semiconductor: Still Worth a Look?

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Girl Investing Secret

So, ON Semiconductor. A name that doesn’t exactly roll off the tongue, does it? It’s a bit like trying to pronounce “Worcestershire,” only with more silicon. I flagged this company as a potential winner back in 2026, a time that now seems both impossibly distant and alarmingly close. The share price has, rather enthusiastically, climbed 53% since then. Which, naturally, raises the question: is there still value to be had, or have we missed the boat? Because, let’s be honest, past performance is a remarkably unreliable predictor of future results. It’s like using a map of Pangea to navigate modern-day traffic.

A Turning Point for Semiconductors

ON Semiconductor, for those unfamiliar, makes the little bits of silicon that make…well, just about everything work. Specifically, they’re into power and sensing chips. This puts them smack-dab in the middle of two rather large trends: electrification and automation. They’ve been putting a lot of effort into silicon carbide (SiC) and gallium nitride (GaN) chips. Now, I’m no physicist, but apparently, these materials are a bit like the Usain Bolt of semiconductors. They can handle higher temperatures and voltages, making them ideal for electric vehicles, renewable energy, and all sorts of industrial applications. GaN, meanwhile, is speedy, efficient, and good for AI data centers. It’s a bit like upgrading from a horse-drawn carriage to a rocket ship.

However, the road hasn’t been entirely smooth. Investments in EVs and renewable energy have been…less frantic than initially predicted. And the U.S. industrial sector has been exhibiting a curious reluctance to bounce back with gusto. This is reflected in their sales figures, which, until recently, were a bit lackluster. But, and this is important, both automotive and industrial sales have been creeping upwards in recent quarters. Industrial revenue is even showing year-over-year growth. It’s a small victory, perhaps, but in the world of investing, we celebrate the small victories.

Management is predicting revenue of $1.435 to $1.535 billion for the first quarter of 2026. According to their CFO, Thad Trent, that would be the first instance of year-over-year growth in over three years. That’s a rather significant milestone, and suggests that the company might actually be turning a corner. Wall Street analysts are, cautiously, forecasting 4.8% revenue growth for 2026, leading to a 24% jump in earnings per share. Which, if it happens, would be rather nice.

ON Semiconductor Revenue

A Value Proposition?

Now, let’s talk about value. This is where things get interesting. The company is a cash-generating machine. In 2025, they produced $1.4 billion in free cash flow – roughly 4.9% of their current market cap. Analysts are projecting that they’ll convert at least 25% of revenue into free cash flow in 2026. Based on these projections, the stock trades at a forward price-to-free-cash-flow multiple of 18.1. That’s a surprisingly low number for a growth stock. And, as if that weren’t enough, they’ve launched a $6 billion share-repurchase program. It’s a bit like finding a twenty-dollar bill in an old coat pocket.

Risks and Opportunities

Of course, no investment is without its risks. Their exposure to the Chinese EV market is a concern, as geopolitical factors are, shall we say, unpredictable. But they also have opportunities in AI data centers (which accounted for a rapidly growing $250 million of revenue in 2025), a potential bounce in the industrial sector, and stabilization in EV spending. It’s a mixed bag, really. But, overall, the valuation remains attractive. Despite the substantial rise in price, there still seems to be plenty of upside for the stock, backed by that rather substantial $6 billion buyback program. For a company with a $28.4 billion market cap, that’s a significant commitment.

So, is ON Semiconductor still worth a look? It’s not a slam dunk, of course. But, as value investors, we’re not looking for slam dunks. We’re looking for companies with solid fundamentals, attractive valuations, and the potential for long-term growth. And, on that basis, ON Semiconductor still looks…interesting. Perhaps, even, a little bit exciting. Which, in the world of semiconductors, is saying something.

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2026-02-22 04:12