ON Semiconductor – An Ethical Small Cap

In Monday’s Goldman Guide we discussed our opinion on Uber and we did not paint a pretty picture. We thought we would look for an ethical play for the Market Monitor today.

The Ethisphere Institute has been publishing a list of the world’s most ethical companies for 10 years. Here is a link below to the 2016 edition.

http://worldsmostethicalcompanies.ethisphere.com/honorees/

On this list is today’s stock, ON Semiconductor Corporation (NASDAQ – ON - $10.61). Below is the one-year chart for ON with the 200-day EMA illustrated. The stock is trading well above that metric.

ON 1-Year, 200 Day EMA

(Source: www.otcmarkets.com)

ON Semiconductor Corporation manufactures and sells semiconductor components for various electronic devices worldwide. Its Application Products Group segment provides analog, mixed-signal, and advanced logic application specific integrated circuit and application specific standard product solutions; and solutions for voltage and current options, as well as foundry and manufacturing services, including integrated passive devices technology, integrated circuit (IC) design, packaging, and silicon technology offerings. The Company’s Image Sensor Group segment offers complementary metal oxide semiconductor and charge-coupled device image sensors, proximity sensors, and image signal processors. Its Standard Products Group segment provides discrete and integrated semiconductor products that perform application functions, such as power switching, signal conditioning, circuit protection, signal amplification, and voltage reference; and develops lower capacitance protection and integrated signal conditioning products to support data transmission rates, micro packages, and switching and rectification technologies. The Company’s System Solutions Group segment supplies analog and mixed signal ICs, digital signal processors, analog and digital tuners, intelligent power modules, and memory and discrete semiconductors. ON Semiconductor Corporation’s devices are used in various end-products, such as automotive electronics, smartphones, media tablets, wearable electronics, computers, servers, industrial building and home automation systems, consumer white goods, imaging systems, LED lighting, power supplies, networking and telecom equipment, medical diagnostics, imaging and hearing health, and sensor networks, as well as the Internet-of-Things.

First, another technical metric that looks great is a short float of a low 2.74%. EPS performance has been more critical than ever for small cap stocks. The Company has met or exceed estimates for EPS four consecutive quarters. Consensus Wall Street analysts’ growth for revenue is for a flat 2016 and a 4.5% increase in 2017. This puts the forward P/E at 10.6 versus the trailing figure of 27.2. This puts the 5-year PEG at 0.2.

Ethical companies do not always equal good stock. This is an overstatement. However, we think ON illuminates itself well in Q4 this year and climbs back up to $12 very early in 2017.

Have a great day!

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