Onsemi (NASDAQ:ON) & ARM (NASDAQ:ARM) Critical Review

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

Institutional and Insider Ownership

7.5% of ARM shares are held by institutional investors. Comparatively, 97.7% of Onsemi shares are held by institutional investors. 0.3% of Onsemi 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 and Earnings

This table compares ARM and Onsemi”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.01 billion	35.83	$306.00 million	$0.75	180.73
Onsemi	$6.67 billion	3.20	$1.57 billion	$1.44	35.43

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

Volatility & Risk

ARM has a beta of 4.08, meaning that its share price is 308% more volatile than the S&P 500. Comparatively, Onsemi has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for ARM and Onsemi, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	2	6	19	1	2.68
Onsemi	0	11	13	0	2.54

ARM presently has a consensus target price of $152.76, suggesting a potential upside of 12.70%. Onsemi has a consensus target price of $54.12, suggesting a potential upside of 6.08%. Given ARM’s stronger consensus rating and higher possible upside, equities research analysts clearly believe ARM is more favorable than Onsemi.

Profitability

This table compares ARM and Onsemi’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARM	21.82%	11.94%	8.62%
Onsemi	22.21%	20.10%	12.36%

Summary

Onsemi beats ARM on 8 of the 15 factors compared between the two stocks.

About ARM

Arm Holdings Plc engages in the licensing, marketing, research, and development of microprocessors, systems IP, graphics processing units, physical IP and associated systems IP, software, and tools. It operates through the following geographical segments: United Kingdom, United States, and Other Countries. The company was founded on November 12, 1990 and is headquartered in Cambridge, the United Kingdom.

About Onsemi

onsemi is engaged in disruptive innovations and also a supplier of power and analog semiconductors. The firm offers vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure, with a focus on automotive and industrial end-markets. It operates through the following segments: Power Solutions Group, Advanced Solutions Group, and Intelligent Sensing Group. The Power Solutions Group segment offers discrete, module, and semiconductor products that perform multiple application functions, including power switching, power conversion, signal conditioning, circuit protection, signal amplification, and voltage reference functions. The Advanced Solutions Group segment is involved in the designing and developing of analog, mixed-signal, advanced logic, ASSPs and ASICs, Wi-Fi and power solutions for a broad base of end-users in the automotive, consumer, computing, industrial, communications, medical and aerospace/defense markets. The Intelligent Sensing Group segment is focused on the designing and developing of CMOS and CCD image sensors, as well as proximity sensors, image signal processors, single photon detectors, inclu