Celestica (CLS) versus ON Semiconductor (ON) Critical Review

Celestica (NYSE: CLS) and ON Semiconductor (NASDAQ:ON) are both computer and technology companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, risk, profitability, earnings, institutional ownership, valuation and dividends.

Volatility & Risk

Celestica has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500. Comparatively, ON Semiconductor has a beta of 2.08, meaning that its stock price is 108% more volatile than the S&P 500.

Insider and Institutional Ownership

66.8% of Celestica shares are held by institutional investors. Comparatively, 99.8% of ON Semiconductor shares are held by institutional investors. 1.0% of Celestica shares are held by company insiders. Comparatively, 1.4% of ON Semiconductor shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Celestica and ON Semiconductor’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Celestica $6.11 billion 0.22 $105.00 million $0.73 14.60
ON Semiconductor $5.54 billion 1.71 $810.70 million $1.88 11.88

ON Semiconductor has lower revenue, but higher earnings than Celestica. ON Semiconductor is trading at a lower price-to-earnings ratio than Celestica, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Celestica and ON Semiconductor’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Celestica 1.72% 8.84% 4.08%
ON Semiconductor 38.55% 85.17% 30.30%

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Celestica and ON Semiconductor, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Celestica 0 8 3 0 2.27
ON Semiconductor 1 7 11 0 2.53

Celestica currently has a consensus price target of $13.36, suggesting a potential upside of 25.35%. ON Semiconductor has a consensus price target of $23.76, suggesting a potential upside of 6.38%. Given Celestica’s higher probable upside, research analysts plainly believe Celestica is more favorable than ON Semiconductor.

Summary

ON Semiconductor beats Celestica on 11 of the 14 factors compared between the two stocks.

Celestica Company Profile

Celestica Inc. is a provider of supply chain solutions. The Company operates in electronics manufacturing services business segment. The Company offers a range of services to its customers, including design and development, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and after-market repair and return services. Its products and services serve a range of applications, including servers; storage systems; optical equipment; aerospace and defense electronics; healthcare products and applications; semiconductor equipment, and a range of industrial and alternative energy products, including solar panels and inverters. It designs, manufactures and tests solar panels for the residential, commercial and utility scale markets. It uses technologies in the assembly and testing of its products.

ON Semiconductor Company Profile

ON Semiconductor Corporation offers a portfolio of sensors, power management, connectivity, custom and system on chip (SoC), analog, logic, timing, and discrete devices. The Company’s segments include Power Solutions Group, Analog Solutions Group and Image Sensor Group. The Power Solutions Group offers a range of discrete, module and integrated semiconductor products. The Analog Solutions Group designs and develops analog, mixed-signal and logic application specific integrated circuits (ASICs) and application specific standard products (ASSPs), and power solutions. The Image Sensor Group designs and develops complementary metal oxide semiconductor (CMOS) and charge-coupled device (CCD) image sensors, as well as proximity sensors, image signal processors, and actuator drivers for autofocus and image stabilization for various end users in the automotive, industrial, consumer, wireless, medical, and aerospace/defense markets.

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