Head-To-Head Review: ON Semiconductor (ON) & Broadcom (AVGO)

ON Semiconductor (NASDAQ: ON) and Broadcom (NASDAQ:AVGO) are both large-cap technology companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.

Profitability

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

Net Margins Return on Equity Return on Assets
ON Semiconductor 14.63% 21.88% 7.27%
Broadcom 10.18% 28.64% 12.68%

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ON Semiconductor 1 7 11 0 2.53
Broadcom 0 1 31 1 3.00

ON Semiconductor currently has a consensus price target of $23.76, suggesting a potential upside of 0.10%. Broadcom has a consensus price target of $304.80, suggesting a potential upside of 20.14%. Given Broadcom’s stronger consensus rating and higher probable upside, analysts clearly believe Broadcom is more favorable than ON Semiconductor.

Valuation and Earnings

This table compares ON Semiconductor and Broadcom’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ON Semiconductor $5.54 billion 1.82 $810.70 million $0.84 28.26
Broadcom $17.64 billion 5.91 $1.69 billion $3.93 64.56

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

Volatility and Risk

ON Semiconductor has a beta of 2.08, indicating that its share price is 108% more volatile than the S&P 500. Comparatively, Broadcom has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500.

Dividends

Broadcom pays an annual dividend of $7.00 per share and has a dividend yield of 2.8%. ON Semiconductor does not pay a dividend. Broadcom pays out 178.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

98.0% of ON Semiconductor shares are owned by institutional investors. Comparatively, 87.6% of Broadcom shares are owned by institutional investors. 1.6% of ON Semiconductor shares are owned by company insiders. Comparatively, 3.6% of Broadcom shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

Broadcom beats ON Semiconductor on 13 of the 17 factors compared between the two stocks.

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.

Broadcom Company Profile

Broadcom Limited is a designer, developer and global supplier of a range of semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor (CMOS)-based devices and analog III-V based products. The Company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. It offers a range of products that are used in end-products, such as enterprise and data center networking, home connectivity, set-top boxes (STBs), broadband access, telecommunication equipment, smartphones, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Its product portfolio ranges from discrete devices to complex sub-systems that include multiple device types, and also includes firmware for interfacing between analog and digital systems. Its products include mechanical hardware that interfaces with optoelectronic or capacitive sensors.

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