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

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

Profitability

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

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

Earnings & Valuation

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

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

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.

Institutional & Insider Ownership

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

Volatility and Risk

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

Analyst Recommendations

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

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

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

Summary

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

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

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.