ON Semiconductor Corporation (ON) DCF Valuation & Fundamental Primer
ON Semiconductor Corporation (ON) currently trades at $58.69 with an enterprise value of $13.96B. Our proprietary institutional model rates ON Semiconductor Corporation at 60/100 (Grade: B · Mixed Fundamental Profile). The current market price prices in an implied 5-year revenue CAGR of 29.1% vs. historical growth of 16.3% (Aggressive Growth Expectations Priced In).
Institutional fundamental teardown of ON Semiconductor Corporation (ON) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
ON Semiconductor Corporation (ON) 3-Scenario DCF Valuation Range
Stress-test ON's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $58.69).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $41.49 -29% | $43.89 -25% | $46.69 -20% | $50.00 -15% | $53.98 -8% |
| 9.3% | $37.58 -36% | $39.47 -33% | $41.64 -29% | $44.16 -25% | $47.12 -20% |
| 10.0% | $34.37 -41% | $35.89 -39% | $37.61 -36% | $39.58 -33% | $41.86 -29% |
| 10.8% | $31.68 -46% | $32.92 -44% | $34.32 -42% | $35.89 -39% | $37.68 -36% |
| 11.5% | $29.40 -50% | $30.43 -48% | $31.58 -46% | $32.86 -44% | $34.30 -42% |
Institutional Software Quality Scorecard (60/100 · Grade B)
Viable recurring software business but carries notable dilution, lower margins, or higher leverage.
Positive FCF but lower conversion efficiency due to capex or timing
Elevated equity dilution; SBC consumes substantial operating cash flow
Solid gross margins with potential for operating leverage at scale
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- Net cash positive: $1.42B balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 15.4% of revenue ($786.5M)
Reverse-DCF Solver: What Growth is Priced Into ON?
The current share price demands 29.1% 5-year CAGR (51.0% net of SBC & dilution)—a +12.8% acceleration over historical run-rate (16.3%). Any growth slowdown risks valuation multiple contraction.
Headline Reverse-DCF ignores Stock-Based Compensation (15.4% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 51.0% 5-year revenue CAGR to justify $58.69/sh on a true per-share economic cash flow basis.
ON Semiconductor Corporation (ON) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $5.11B | $5.11B | $5.94B | $6.91B | $8.03B | $9.34B | $10.87B |
| Gross Profit | $3.70B | $3.70B | $4.30B | $5.00B | $5.82B | $6.76B | $7.87B |
| Operating Income (EBIT) | $-183.9M | $-183.9M | $-213.8M | $-248.7M | $-289.2M | $-336.3M | $-391.2M |
| Stock-Based Compensation (SBC) | $786.5M | $786.5M | $914.7M | $1.06B | $1.24B | $1.44B | $1.67B |
| Unlevered Free Cash Flow (FCF) | $582.2M | $582.2M | $677.1M | $787.5M | $915.8M | $1.07B | $1.24B |
| SBC-Adjusted True Cash Flow | $-204.3M | $-204.3M | $-237.6M | $-276.3M | $-321.3M | $-373.7M | $-434.6M |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -11.8 + 0.47 × (Rule of 40) · R² = 67%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| ON Semiconductor Corporation | ON | $24.00B | $5.11B | 72.4% | 11.4% | 27.7% | 15.4% | 4.4× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 4.4× | $22.58B | $24.00B | $58.69 | 0.0% |
| -20% Multiple Compression | 3.5× | $18.07B | $19.49B | $47.65 | -20.0% |
| -35% Multiple Compression | 2.9× | $14.68B | $16.10B | $39.36 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $25.53B | $26.95B | $65.91 | +13.1% |
Frequently Asked Questions: ON Semiconductor Corporation (ON) Valuation
What is ON Semiconductor Corporation (ON)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, ON Semiconductor Corporation (ON) has a Base Case implied value of $37.61 per share (with a Bear Case of $19.29 and a Bull Case of $61.83), compared to its current price of $58.69. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is ON Semiconductor Corporation (ON)'s Rule of 40 score and Free Cash Flow margin?
ON Semiconductor Corporation achieves a Rule of 40 score of 27.7%, combining a 16.3% revenue growth run-rate with a 11.4% TTM free cash flow margin on $5.11B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into ON stock according to Reverse-DCF analysis?
At $58.69 per share (Enterprise Value of $22.58B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 29.1%, compared to ON Semiconductor Corporation's historical CAGR of 16.3%. Overall market expectations are rated as "Aggressive Growth Expectations Priced In".
How does ON Semiconductor Corporation compare to Software & Cloud Services software peers?
ON Semiconductor Corporation (ON) earns an institutional Software Quality Score of 60/100 (Grade B — Mixed Fundamental Profile). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact ON Semiconductor Corporation (ON)'s valuation?
ON Semiconductor Corporation recorded $786.5M in TTM stock-based compensation (15.4% of revenue). When treating SBC as a cash-equivalent compensation expense, ON Semiconductor Corporation's SBC-adjusted free cash flow yield is -0.9%, scoring 10/25 on our Shareholder Dilution Friction pillar.