Onto Innovation Inc. (ONTO): A Bull Case Theory 

We came across a bullish thesis on Onto Innovation Inc. on Business Invest’s Substack by Francesco Ferrari. In this article, we will summarize the bulls’ thesis on ONTO. Onto Innovation Inc.’s share was trading at $147.00 as of December 1st. ONTO’s trailing and forward P/E were 41.41 and 23.92 respectively according to Yahoo Finance.

Onto Innovation (ONTO) designs advanced inspection and metrology systems used throughout semiconductor manufacturing to detect defects and measure chips with extreme precision. As semiconductors continue to shrink and increase in complexity, Onto’s tools have become indispensable in helping chipmakers improve yields and reduce costly production errors.

The company, with a market capitalization of $6.47 billion, operates at the intersection of hardware and software, offering integrated solutions that ensure quality control and process efficiency across leading-edge nodes. Financially, Onto demonstrates resilient fundamentals and operational efficiency: revenue has grown at a 3-year CAGR of 3.9%, reaccelerating to 15.5% in the past year, while gross margins stand at 53.5% and free cash flow margins at 23%. The company also generates a healthy 14.7% return on invested capital, reflecting disciplined capital allocation and profitability across cycles.

Despite a beta of 1.60 indicating higher volatility, Onto has rewarded long-term investors with a 34.7% compound annual growth rate in its share price over the last five years. The company’s exposure to advanced process control, wafer inspection, and yield optimization technologies positions it to benefit from secular tailwinds in semiconductor miniaturization, heterogeneous integration, and AI-driven chip design.

Onto’s precision measurement systems not only safeguard production efficiency but also capture expanding demand from logic and memory manufacturers transitioning to more advanced nodes. Overall, Onto Innovation’s combination of durable growth, strong free cash flow generation, and strategic importance within semiconductor production underpins its investment appeal in an industry undergoing structural technological evolution.

Previously we covered a bullish thesis on KLA Corporation (KLAC) by Quality Equities in January 2025, which highlighted its leadership in process control and yield management amid AI-driven semiconductor demand. The stock has appreciated approximately by 52.76% since our coverage as semiconductor spending accelerated. The thesis still stands. Francesco Ferrari shares a similar but focuses on Onto Innovation’s precision metrology and defect inspection technologies.

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Disclosure: None.