Seeking Alpha: ON Semiconductor Talking The Talk, But Still Has To Walk The Walk

Near a 52-week high, things have been going fairly well for the shares of ON Semiconductor (NASDAQ:ONNN). Like so many other semiconductor companies, ON Semiconductor is looking to lean more heavily on the auto and industrial markets to generate above-average growth with more stability. Like so many others, ON is also looking to higher utilization, an improved mix, and internal efficiencies to generate the operating margin leverage that semiconductor analysts (and investors) prize so highly).

I can't say that I'm disappointed with how ON Semiconductor has been performing. The shares are up more than 40% from my last article and about 70% from when I wrote about the shares as a Top Idea. Relative to peers/rivals like Fairchild (NASDAQ:FCS) (up 42%), STMicroelectronics (NYSE:STM) (up 7%), and Diodes (NASDAQ:DIOD) (up 5%), that's not too bad, and it also stacks up well against stocks like Texas Instruments (NASDAQ:TXN) and Linear Technology (NASDAQ:LLTC).

Even with those positives, I'm not quite as bullish about ON as I have been in the past. The Sanyo deal is a lemon and management has its work cut out to prove that the Aptina deal will be better. Likewise for the company's bold projections for 2017 margins when past projections have proven too ambitious. Although the company's margins can support a EV/revenue multiple that would generate a $15 fair value, my blended fair value (EV/revenue and DCF) is closer to $13.50; making the shares a decent hold but maybe not such a compelling buy unless you are really confident in the potential for above-average growth and strong margin leverage.

Read more here:
ON Semiconductor Talking The Talk, But Still Has To Walk The Walk