ON Semiconductor Corporation (ON): what the price requires

At today's price, ON Semiconductor Corporation (ON) is priced for today's economics sustained for ~24.1 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/ON

Headline

FieldValue
TickerON
CompanyON Semiconductor Corporation
Current price$91.55/sh
CompositionIntelligent Power 50% / Intelligent Sensing 19% / Other 30%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin (mid-cycle)7.5%
Trailing margin (depressed year)-2.8%
Must persist for24.1y
Multiple paid83x mid-cycle operating income

Solve inputs: computed at a 13.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~3.3 years.

Reconcile: at the x-ray's 9.3% required return this reads ~13.6 years; the models below use their own rates.

How unusual the bet is: elevated

ReferenceValue
vs own history+0.06σ
sustained it ~10 years at this level15%
implied end-window share1%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset6.07x4expensive
Earnings3.38x4expensive
Relative1.88x3expensive
Growth2.25x3expensive

Families that call it expensive: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.

Per-Model Detail (n=14)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$23.373.92xyesFCF base $1.2B, growth -8% (input: historical growth), terminal g 0.5%, WACC 8.5%, 5yr projection
DCF Exit MultipleGrowth$71.131.29xyesExit EV/EBITDA: 39.9x / 41.9x / 43.9x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$48.601.88xyesP/E 34.27x (blended: sector 22x + trailing (TTM) 63x), scenarios: 29.0x / 34.3x / 39.6x (bear / base = sector held flat / bull), EV/EBITDA 23.76x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$15.745.82xyesBV/sh $18.53, ROE (TTM) 7.9%, ke 9.3%
Two-Stage Excess ReturnAsset$14.486.32xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$40.692.25xyesRev $6.1B, growth -8% (input: historical growth; tapered), Terminal P/S: 5.0x / 6.0x / 6.9x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$36.972.48xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.83B × (1−21%) / WACC 8.5% → EPV (no growth)
Residual IncomeAsset$14.286.41xyesBV $18.53 + 5yr PV of (ROE (TTM) 7.9% − Kₑ 9.3%) × BV; BV grows 5.1%/yr
Graham NumberAsset$23.813.85xyes√(22.5 × EPS $1.36 × BVPS $18.53) — Graham's conservative floor
EV/EBITDA RelativeRelative$33.032.77xyesEBITDA $0.89B × sector EV/EBITDA 16.0x
FCF YieldEarnings$29.253.13xyesFCF $1181.1M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$25.203.63xyesSBC-adj FCF $1.03B (FCF $1.18B − SBC $0.15B) capitalized at Kₑ
Ben Graham FormulaEarnings$1.1480.31xyesEPS $1.36 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$76.921.19xyesRevenue $6.06B × sector P/S 5.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$14.706.23xyesEPS $1.36 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$624.9m
Net debt / NOPAT (after-tax)1.77x
Net debt / operating income (pre-tax)1.40x
Interest coverage6.7x
Share count CAGR (buyback)-3.2%
Burning cashno

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 7.5%); the trailing year was depressed.

Bullet Takeaways

The decisive number for ON is the automotive line. In Q1 2026 automotive revenue grew nearly 5% year over year, the first year-over-year growth after seven straight quarters of decline. If that inflection is real, the cycle is turning; if it is a head fake, the price has a long way to fall.

At $121.52 no valuation family reaches the price. The methods cluster far below, with a blended estimate near $23, and the price is rich on assets, earnings power, peers and even forward growth. Inverting the price implies roughly 29 years of high-end compounding, an extreme duration.

The business is solid through the cycle but currently mid-cycle, not peak. Trailing operating margin is 10%, against a normalized figure near 7.5%, with net debt around $625 million and interest coverage near 6.9x. The price assumes the silicon-carbide and AI-data-center growth more than offsets the cyclicality; the methods say it has to be flawless for a very long time.

Bull Case

Anchor on the one number that flips the verdict: automotive revenue growth. ON Semiconductor's automotive business reached $797 million in Q1 2026, roughly flat sequentially but up nearly 5% year over year, the first year-over-year increase after seven consecutive quarters of decline. For a company whose largest end market is autos, that inflection is the whole signal. Seven quarters of decline pulled the stock and the earnings down to a cyclical low; a turn in that line means the trough is behind, and operating leverage works in reverse, expanding margins as volumes recover.

The growth content layered on top is what makes the recovery more than cyclical. ON's Intelligent Power segment, half of revenue, is built around silicon carbide for electrified vehicles, and management cited silicon-carbide content at roughly 55% share of new EV models shown at the 2026 Beijing Auto Show. The 10-K frames the strategy around "development initiatives to accelerate growth in high-margin products" and a 2025 acquisition to deepen the portfolio (FY2025 10-K, accession 0001097864-26-000006). On top of EVs, the AI data-center business grew more than 30% sequentially in Q1 and management expects it to double year over year in 2026. Power semiconductors into both EVs and AI infrastructure is a structurally growing demand base, not just a cyclical bounce.

The quarter showed the model is intact even at mid-cycle. Q1 2026 revenue of $1,513 million beat the guidance midpoint, GAAP gross margin held at 38.5%, and non-GAAP operating margin was 19.1% with non-GAAP EPS of $0.64 ahead of the $0.61 estimate. Management guided FY2026 revenue to about $6.29 billion and FY2027 to $6.94 billion. The balance sheet is sound, with net debt near $625 million and interest coverage close to 7x, and the share count is shrinking about 3% a year. If the automotive cycle has genuinely turned and the silicon-carbide and AI content keeps compounding, the earnings power two years out is well above the trailing trough that the static methods are anchored on.

Bear Case

Lead with the plain disconnect, not a ratio: the price is telling a growth story that the company's own economics do not yet support. ON is a cyclical semiconductor manufacturer whose trailing operating margin is 10% and whose through-cycle normalized margin is closer to 7.5%. The market is pricing it as a secular compounder. At $121.52 (June 27, 2026) no valuation family reaches the price, and the gap is not small: the blended central estimate sits near $23. When every method, asset, earnings-power, peer-multiple and forward-growth, lands far below the price, the price is a bet on something the standard frames cannot see, and the burden of proof is on the bull.

Now the numbers as evidence. Inverting the price implies sustaining high-end growth for about 29 years, and the rarity check is elevated with the fade assumption tripped, meaning that persistence is well beyond the base rate. The reliability flag on the implied range is low precisely because the answer depends so heavily on assumptions the trailing data does not yet confirm. The single year-over-year uptick in automotive revenue is encouraging, but one quarter of roughly 5% growth after a long decline is a thin foundation for a multi-decade compounding assumption.

The cyclicality is the structural truth. Semiconductor manufacturing is fixed-cost heavy; when demand softens, utilization falls and gross margin compresses fast. The 10-K acknowledges that changes "to customer demand or based on business strategy" and the need to invest in capacity "may adversely impact" results, and warns that "competitive pressures may limit our ability to raise prices," with any inability to maintain or raise pricing hurting revenue (FY2025 10-K, accession 0001097864-26-000006). EV demand has already proven lumpy, and silicon-carbide pricing faces aggressive competition, particularly from Chinese suppliers. If the automotive recovery stalls or AI data-center demand normalizes, ON re-rates toward its cyclical earnings, and the methods that all sit far below the price are where that re-rating lands. Paying $121.52 for a 10%-margin cyclical priced for 29 years of compounding leaves no room for the cycle to disappoint.

Valuation

ON's valuation is the clearest possible case of a price that exceeds every method. The blended central estimate is near $23 against a price of $121.52, and no family reaches the price: the asset family values the stock at roughly an eighth of the price, the earnings-power family at under a quarter, the peer-multiple and forward-growth families at under half. Even the most generous individual reads, a DCF exit multiple near $90 and a P/sales near $77, sit below the price. The growth family is the least far below, consistent with a market pricing ON as a secular grower, but it still does not clear the bar.

The inversion makes the assumption explicit. With current operating margin around 10% and a normalized figure near 7.5%, backing out the price requires sustaining growth at the high-end ceiling for about 29 years. That is among the longest implied durations a cyclical can carry, and the reliability flag is low while the rarity assessment is elevated with the fade check tripped. The methods are not saying ON is a bad business; they are saying the price already pays for nearly three decades of flawless, uninterrupted compounding from a company whose end markets visibly move in cycles.

The balance sheet supports the business but not the price. Net debt near $625 million against $2.4 billion of liquid assets, interest coverage close to 7x, and a shrinking share count mean there is no financial fragility; ON can invest through the cycle. What the balance sheet cannot do is shorten the 29-year duration the price requires or smooth the cyclicality of the margins. The honest read is that the price embeds a best-case secular-growth scenario, and the entire spread between the price and the methods is the optionality on silicon carbide and AI data center proving large and durable. If that optionality delivers, the price is defensible; if the cycle reasserts, the methods are the gravity.

Catalysts

ON Semiconductor reported Q1 2026 on May 6, 2026: revenue of $1,513 million above the guidance midpoint, GAAP gross margin of 38.5%, non-GAAP operating margin of 19.1%, and non-GAAP EPS of $0.64 against a $0.61 estimate (Q1 2026 earnings release). The standout was automotive revenue of $797 million, up nearly 5% year over year after seven quarters of decline, alongside AI data-center revenue growing more than 30% sequentially (Seeking Alpha).

The catalysts ahead are the durability of those two trends. Management guided Q2 2026 revenue to $1.535 to $1.635 billion and EPS of $0.65 to $0.77, and framed FY2026 revenue near $6.29 billion rising to $6.94 billion in FY2027, with AI data-center revenue expected to double year over year (Investing.com). Watch three things over the next two quarters: whether automotive revenue posts a second consecutive year-over-year gain confirming the cycle turn, whether AI data-center momentum holds at the pace management projects, and whether gross margin recovers toward the 40s as utilization improves. Confirmation on both end markets would support the secular-growth read the price assumes; an automotive stall or silicon-carbide pricing pressure would pull the stock back toward the valuation methods, which all sit far below the current price.

Peer Cohorts (Per Segment, With Filing Citations)

PSG (Power Solutions Group) (reported)

AMG (Analog and Mixed-Signal Group) (reported)

ISG (Intelligent Sensing Group) (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive ON report on boothcheck