Wednesday, 30 August 2017

Growth and Value Combined in 1 Stock

It’s usually difficult to find a stock at a bargain price when growth is involved but not always. ON Semiconductor (ON), a manufacturer of semiconductor components for power management and imaging, surprisingly offers growth and value.

The company posted explosive revenue growth during the first half of the year, yet it’s priced at 10 times forward earnings, and the growth is not expected to vanish during the next few years. Double-digit top-line growth is in the cards. Regarding the bottom line, analysts expect earnings to grow 27% during the next five years. 

Regarding further growth, it might not be as explosive, but the company is going to witness healthy growth. The global automotive semiconductor market is set to grow at CAGR of 6.4% from 2017 to 2022, according to Lucintel. The automotive application of the imaging sensor market is expected to grow at a CAGR of 15.91% from 2015 to 2020. Advanced driving assistance systems and security awareness are driving the growth of the imaging sensors market. Regarding power management, TechNavio predicts the market will grow 7% p.a. until 2020.

Overall, ON Semiconductor is set to benefit from the growth of power management and image sensors. End markets like automotive will fuel this growth. Low double-digit growth is in the cards for the company amid its strong presence in the imaging semiconductor market. Further, integration synergies of the Fairchild acquisition are kicking in as operating expenses grew at a slower rate than revenue growth.