ON
ON Semiconductor Corporation
$117.84
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 75.1% above fair value
You pay
$117.84
Bear
$49.76
Fair
$67.29
Bull
$84.82
Bear
$49.76
-57.8%
$3.63 × 12x + net cash
Fair
$67.29
-42.9%
$3.63 × 16x + net cash
Bull
$84.82
-28.0%
$3.63 × 20x + net cash
Key Value Driver
Through-cycle normalized EPS ($3.63)
Implied Market Multiple
32.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $94.25 from 46 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $67.29 per share.
Warnings
Price-to-book value of 8.2x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $94.25 (from 46 analysts). Our estimate is 41% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing