ON Semiconductor Corporation (NASDAQ:ON) traded at around $83 on October 7, down 4.40% on the day, though still 72.72% higher over twelve months. On the October 6 episode of Mad Money, Jim Cramer said that if you want a laggard semiconductor stock that can play catch up, you could do a lot worse than this one.
His case rests on the Synaptics deal being recut from $7 billion in stock to $5.7 billion in cash.
READ ALSO: Is Lam Research, KLA, or Applied Materials the Best Chip Equipment Buy? Jim Cramer Weighs In
Why He Calls It a Laggard:
The gap between this stock and the rest of the sector is the starting point for his argument. The shares traded at around $83 against a 52-week high of $134.92, so the price is 39% below it. Cramer contrasted that with other semiconductor names trading close to their own highs.
He traced the decline to the original Synaptics terms, which the market read as a large overpayment in stock. The renegotiated deal removes that objection, and he described the overhang as no longer a problem.
Revenue grew 9.20% in the most recent quarter, and earnings grew 33.20%, so the business did not deteriorate while the stock did. Billionaire investors hold ten semiconductor stocks. The one ranked first has returned 24% since June.
What Catching Up Would Require:
The two earnings multiples show the size of the move he is describing. The stock trades at 53.23 times trailing earnings and 18.22 times forward. A gap that wide means the catch-up is already expected, because profit has to nearly triple for the forward figure to be met.
A PEG ratio of 0.19 is the bullish reading of the same fact, and it only holds if the growth arrives. The cash statement is the strongest part of his case. Free cash flow of $1.50 billion arrived against $630.20 million of net income.
Against that, return on equity of 8.31% is what the business currently earns on the capital inside it. In January we ranked ten stocks for high returns. The one we put first has returned almost 30% since.
The Valuation Case:
ON Semiconductor traded at around $83 on October 7 and is worth $32.12 billion. Sustainability depends on vehicle production, since automotive is the largest end market and the most rate-sensitive. On price, the stock trades at 5.18 times sales and 4.45 times book value on book value of $18.54 a share.
Enterprise value to EBITDA of 15.78 counts the $4.71 billion of debt and is ordinary for the sector. Short interest of 10.43% of the float is high, and a beta of 2.05 means the shares move twice as hard as the index.
Conclusion:
Cramer’s laggard framing is accurate on the price and on the business. The stock sits 39% below its 52-week high, revenue grew 9.20% with earnings up 33.20%, and free cash flow of $1.50 billion was more than double reported net income. However, a forward multiple of 18.22 against 53.23 trailing means the catch-up is already in the price rather than ahead of it, and return on equity is 8.31%. Short interest of 10.43% is positioned against the recovery. The number to watch is earnings growth, because 33.20% has to continue for the forward multiple to be reached.
Market Sentiment:
ON Semiconductor Corporation was held by 86 hedge funds with a combined stake value of about $2.71 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 58 hedge fund holders with a cumulative investment value of around $1.65 billion in the previous quarter.
READ NEXT: NVIDIA (NVDA) vs. Broadcom (AVGO): Which AI Chip Stock Has the Stronger Moat? and Is Lam Research, KLA, or Applied Materials the Best Chip Equipment Buy? Jim Cramer Weighs In
This article is originally published at Insider Monkey.
