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Onto Innovation Inc (ONTO)
NYSE:ONTO
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Onto Innovation
(NYSE:ONTO)
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Rating:76Outperform
Price Target:
$117.00
▼(-18.59% Downside)
Onto Innovation's strong financial performance and positive earnings call outlook are the primary drivers of its stock score. The company's robust balance sheet and strategic acquisitions position it well for future growth. However, technical indicators suggest caution, and the valuation is moderate, which tempers the overall score.
Positive Factors
Strong Financial Health
Onto Innovation's low leverage and high equity ratios indicate robust financial stability, reducing financial risk and enhancing its capacity to invest in growth opportunities.
Strategic Acquisition
The acquisition is expected to add over $130 million in annual revenue and increase EPS by more than 10%, strengthening Onto Innovation's market position and product offerings.
Revenue Growth
Consistent revenue growth and strong operating margins demonstrate the company's effective market strategies and product demand, supporting long-term financial performance.
Negative Factors
Free Cash Flow Decline
A decline in free cash flow growth could limit Onto Innovation's ability to fund new projects or return capital to shareholders, potentially impacting future financial flexibility.
Gross Margin Pressure
Tariff impacts on gross margins could reduce profitability, affecting the company's ability to maintain competitive pricing and invest in growth initiatives.
Operating Margin Decline
A temporary decline in operating margins due to lower revenue may indicate cost pressures and efficiency challenges, potentially affecting short-term profitability.
Onto Innovation (ONTO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$7.04B
Dividend YieldN/A
Average Volume (3M)1.52M
Price to Earnings (P/E)35.6
Beta (1Y)2.34
Revenue Growth15.51%
EPS Growth20.31%
CountryUS
Employees1,551
SectorTechnology
Sector Strength88
IndustrySemiconductors
Share Statistics
EPS (TTM)1.25
Shares Outstanding49,003,570
10 Day Avg. Volume1,755,010
30 Day Avg. Volume1,516,212
Financial Highlights & Ratios
PEG Ratio0.64
Price to Book (P/B)4.37
Price to Sales (P/S)8.53
P/FCF Ratio39.39
Enterprise Value/Market Cap0.56
Enterprise Value/Revenue3.83
Enterprise Value/Gross Profit7.42
Enterprise Value/Ebitda15.65
Forecast
1Y Price Target
$139.63Price Target Upside-2.84% Downside
Rating ConsensusStrong Buy
Number of Analyst Covering8
Onto Innovation Business Overview & Revenue Model
Company DescriptionOnto Innovation Inc. engages in the design, development, manufacture, and support of process control tools that performs macro defect inspection and 2D/3D optical metrology, lithography systems, and process control analytical software worldwide. It offers process and yield management solutions, and device packaging and test facilities through standalone systems for macro-defect inspection, packaging lithography, probe card test and analysis, and transparent and opaque thin film measurements; and process control software portfolio that includes solutions for standalone tools, groups of tools, and enterprise-or factory-wide suites. The company also provides spare parts and software licensing services. Its products are used by semiconductor and advanced packaging device manufacturers; silicon wafer; light emitting diode; vertical-cavity surface-emitting laser; micro-electromechanical system; CMOS image sensor; power device; RF filter; data storage; and various industrial and scientific applications. The company was formerly known as Rudolph Technologies, Inc. Onto Innovation Inc. was founded in 1940 and is headquartered in Wilmington, Massachusetts.
How the Company Makes MoneyOnto Innovation generates revenue primarily through the sale of its semiconductor equipment and related services. The company's revenue model is built on several key streams: equipment sales, which include metrology and inspection systems; service contracts that provide maintenance and support for their products; and software solutions that enhance the performance of semiconductor manufacturing processes. Additionally, partnerships with major semiconductor manufacturers and collaborations with research institutions contribute to Onto's earnings by expanding its market reach and facilitating innovation. The company also benefits from industry trends towards increased demand for advanced semiconductor technologies, which drives sales growth.
Onto Innovation Key Performance Indicators (KPIs)
Onto Innovation Earnings Call Summary
Earnings Call Date:Aug 07, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Nov 05, 2025
Earnings Call Sentiment Positive
The earnings call presented a positive outlook for Onto Innovation, with strong Q2 performance, strategic acquisitions, and expected growth in AI packaging and advanced nodes. Despite anticipated short-term revenue decline and tariff impacts in Q3, the company remains confident in a rebound in Q4.Q2-2025 Updates
Positive Updates
Strong Second Quarter Performance
Onto Innovation delivered strong revenue and operating margin in Q2, exceeding the midpoint of the guidance range with revenue at $253.6 million, a 5% increase year-over-year.
Strategic Acquisition
Announced a strategic agreement to acquire product lines from Semilab International, expected to add over $130 million in annual revenue and increase first-year earnings per share by more than 10%.
AI Packaging and Dragonfly Platform
Significant progress with the next-generation Dragonfly platform, achieving milestones with key customers and expecting to ship to several customers in the second half of the year.
Advanced Node Market
Second-quarter revenue from memory markets remained strong, with an expected nearly double revenue by year-end 2024.
Financial Position and Cash Flow
Cash from operations was $58 million, and the company ended the quarter with $895 million in cash and investments.
Negative Updates
Temporary Revenue Decline Expected in Q3
Revenue for Q3 is expected to be between $210 million and $225 million, reflecting an anticipated slowdown in advanced node spending.
Tariff Impact
Tariffs are expected to impact gross margins by 1 percentage point in Q3, with incurred tariff expenses of approximately $2 million to $3 million.
Operating Margin Pressure
Q3 operating margins are expected to decrease temporarily to a range of 18% to 21% due to lower revenue.
Company Guidance
During the Onto Innovation Second Quarter Earnings Release Conference Call for 2025, the company reported a strong performance, with revenue of $253.6 million, marking a 5% year-over-year increase. The gross margin for the quarter stood at 54.5%, slightly impacted by tariffs, while the operating margin reached 25.9%. Earnings per share (EPS) were $1.25, influenced by foreign exchange and tax rate changes. Advanced nodes contributed $89 million, specialty devices and advanced packaging $117 million, and software and services $48 million to the revenue. The company announced a strategic acquisition of product lines from Semilab International, expected to add over $130 million in annual revenue and increase EPS by more than 10%. Looking ahead, third-quarter revenue is expected to range from $210 million to $225 million, with a projected rebound in the fourth quarter, aligning with first-half 2025 levels.Onto Innovation Financial Statement Overview
Summary
Onto Innovation exhibits strong financial health with robust revenue growth and profitability. The balance sheet is particularly strong, with low leverage and high equity ratios. While cash flow generation is solid, the recent decline in free cash flow growth warrants monitoring. Overall, the company is well-positioned financially, with strengths in profitability and balance sheet stability.Income Statement
Onto Innovation has demonstrated strong revenue growth with a TTM increase of 10.99%. The company maintains healthy profit margins, with a gross profit margin of 51.29% and a net profit margin of 19.29% in the TTM period. The EBIT and EBITDA margins are also robust at 20.82% and 26.25%, respectively. However, there is a slight decline in gross profit margin compared to previous periods, indicating potential cost pressures.85
Very Positive
Balance Sheet
The balance sheet is strong, characterized by a low debt-to-equity ratio of 0.0068, indicating minimal leverage and financial risk. The return on equity is solid at 10.37%, reflecting efficient use of equity capital. The equity ratio stands at 91.76%, showcasing a strong equity base relative to total assets, which enhances financial stability.90
Very Positive
Cash Flow
Cash flow performance is stable, with an operating cash flow to net income ratio of 1.75, indicating good cash generation relative to net income. However, the free cash flow growth rate has declined by 3.59% in the TTM period, which could be a concern if the trend continues. The free cash flow to net income ratio remains strong at 87.30%, suggesting efficient conversion of earnings into cash.78
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.04B | 987.32M | 815.87M | 1.01B | 788.90M | 556.50M |
| Gross Profit | 534.14M | 515.31M | 420.25M | 539.22M | 429.09M | 278.45M |
| EBITDA | 253.43M | 249.41M | 183.29M | 301.38M | 222.21M | 94.25M |
| Net Income | 199.87M | 201.67M | 121.16M | 223.33M | 142.35M | 31.02M |
Balance Sheet | ||||||
| Total Assets | 2.14B | 2.12B | 1.91B | 1.79B | 1.65B | 1.47B |
| Cash, Cash Equivalents and Short-Term Investments | 894.94M | 852.33M | 697.81M | 547.78M | 511.34M | 373.72M |
| Total Debt | 13.41M | 15.16M | 19.52M | 22.02M | 17.72M | 20.93M |
| Total Liabilities | 177.00M | 191.21M | 173.18M | 198.44M | 223.76M | 203.43M |
| Stockholders Equity | 1.96B | 1.93B | 1.74B | 1.60B | 1.43B | 1.26B |
Cash Flow | ||||||
| Free Cash Flow | 238.49M | 213.77M | 149.40M | 118.30M | 163.24M | 102.16M |
| Operating Cash Flow | 273.17M | 245.68M | 171.97M | 136.70M | 175.28M | 105.98M |
| Investing Cash Flow | -125.47M | -226.55M | -103.39M | -55.69M | -141.79M | -48.60M |
| Financing Cash Flow | -104.95M | -35.67M | -9.47M | -68.35M | 2.67M | -53.70M |
Onto Innovation Technical Analysis
Positive
143.71
Price Trends
111.39
Positive
104.74
Positive
129.33
Positive
Market Momentum
8.30
Negative
74.37
Negative
76.85
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ONTO, the sentiment is Positive. The current price of 143.71 is above the 20-day moving average (MA) of 123.29, above the 50-day MA of 111.39, and above the 200-day MA of 129.33, indicating a bullish trend. The MACD of 8.30 indicates Negative momentum. The RSI at 74.37 is Negative, neither overbought nor oversold. The STOCH value of 76.85 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ONTO.
Onto Innovation Risk Analysis
Onto Innovation disclosed 40 risk factors in its most recent earnings report. Onto Innovation reported the most risks in the "Tech & Innovation" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Onto Innovation Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $9.48B | 44.01 | 24.23% | ― | 43.69% | 51.22% | |
78 Outperform | $5.42B | 41.84 | 24.28% | 1.17% | 27.88% | 37.85% | |
76 Outperform | $7.04B | 35.57 | 10.53% | ― | 15.51% | 20.31% | |
76 Outperform | $7.26B | 23.97 | 7.37% | 2.51% | -1.20% | -19.46% | |
67 Neutral | $6.25B | 304.96 | 11.57% | ― | 22.22% | ― | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
51 Neutral | $5.26B | ― | -6.75% | ― | -18.82% | -195.20% |
* Technology Sector Average
ONTO
Onto Innovation
143.71
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-30.48%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.