Is It Time to Consider Buying Onto Innovation Inc. (NYSE:ONTO)?

Onto Innovation Inc. (NYSE:ONTO) has been in the spotlight due to a substantial share price increase on the New York Stock Exchange over the past few months. The company is approaching its yearly highs after the recent share price increase. As a large-cap stock that is widely covered by analysts, it can be assumed that any recent changes in the company’s outlook are already factored into the stock price. However, what if the stock is still a bargain? Today, we will analyze the most recent data on Onto Innovation’s outlook and valuation to see if the opportunity still exists.

Discover our latest analysis for Onto Innovation

What is the opportunity for Onto Innovation?

According to our price multiple model, where we compare the company’s price-to-earnings ratio to the industry average, the stock currently appears expensive. In this case, we have used the price-to-earnings (PE) ratio since there is not enough information to reliably forecast the stock’s cash flows. We note that Onto Innovation’s ratio of 79.42x is higher than its peer average of 30.74x, suggesting that the stock is trading at a premium compared to the Semiconductor industry. If you like the stock, you might want to keep an eye out for a potential price drop in the future. Since Onto Innovation’s stock is quite volatile (i.e. its price movements are magnified relative to the rest of the market), this could mean that the price can decline, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.

What type of growth will Onto Innovation generate?

Investors looking for growth in their portfolio may want to consider a company’s prospects before buying its shares. While value investors argue that it’s the intrinsic value relative to the price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. Onto Innovation’s earnings over the next few years are expected to double, indicating a very bullish future. This should lead to stronger cash flows, fueling a higher share price.

What this means for you

Are you a shareholder? ONTO’s optimistic growth story appears to have been factored into its current share price, with shares trading at price multiples above the industry. At this current price, shareholders may be asking themselves a different question: Should I sell? If you believe ONTO should trade below its current price, selling high and buying back when its price returns to the industry’s price-to-earnings ratio may be profitable. But before making that decision, check whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ONTO for a while, now might not be the best time to get in on the stock. The price has outpaced its industry peers, meaning there’s likely no further upside in the event of a pricing mistake. However, the positive outlook is encouraging for ONTO, meaning it’s worth looking more deeply at other factors in order to take advantage of the next price drop.

Since timing is a very important element in choosing a stock, it is worth taking a look at the latest analyst forecasts. Fortunately, you can check out analyst forecasts by clicking here.

If you are no longer interested in Onto Innovation, you can use our free platform to view our list of over 50 other stocks with high growth potential.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to constitute financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. Our goal is to provide you with focused, long-term analysis based on fundamental data. Please note that our analysis may not factor in the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.

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