Onto Innovation Inc. (NYSE:ONTO), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the companyâs outlook is already priced into the stock. However, what if the stock is still a bargain? Letâs take a look at Onto Innovationâs outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Onto Innovation
Is Onto Innovation Still Cheap?
Onto Innovation is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, Iâve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stockâs cash flows. I find that Onto Innovationâs ratio of 29.12x is above its peer average of 23.88x, which suggests the stock is trading at a higher price compared to the Semiconductor industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Onto Innovationâs share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Onto Innovation generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so letâs also take a look at the company's future expectations. Though in the case of Onto Innovation, it is expected to deliver a relatively unexciting earnings growth of 4.8%, which doesnât help build up its investment thesis. Growth doesnât appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? ONTOâs future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question â should I sell? If you believe ONTO should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If youâve been keeping tabs on ONTO for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean itâs worth diving deeper into other factors in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Onto Innovation, and understanding it should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About NYSE:ONTO
Onto Innovation
Engages in the design, development, manufacture, and support of process control tools that performs optical metrology.
Flawless balance sheet with reasonable growth potential.