Screened: 2026-05-28 | Data sources: yfinance, Finnhub | Currency: USD unless noted
| Metric | Value |
|---|---|
| Current price | $260.40 |
| 52-week high | $316.00 |
| 52-week low | $89.40 |
| Distance from 52w high | -17.7% |
| YTD return (2026) | +57.0% |
| Recovery from 52w low | +191.0% |
| 50-day MA | $256.40 |
| 200-day MA | $181.06 |
Gate result: YTD +57% but -17.7% from 52w high — NOT within the abbreviated threshold (YTD>80% AND within 10% of high). Full screen proceeds.
Onto Innovation is a metrology and inspection equipment company formed from the 2019 merger of Nanometrics and Rudolph Technologies. Serves semiconductor wafer process control: overlay, film measurement, defect inspection, and advanced packaging. ~$1B revenue. HQ: Wilmington, MA.
Thesis context: Mid-cycle slowdown in 2023 (revenue trough $816M) now clearly reversing. Q1 2026 revenue $292M is the highest quarterly print in the data set. ONTO targets advanced packaging and gate-all-around (GAA) transition — more correlated to packaging/backend WFE and specialty processes than pure leading-edge front-end (AMAT/KLA addressable).
| Multiple | Value | Commentary |
|---|---|---|
| Market cap | $12.94B | |
| Enterprise value | $12.62B | Net cash positive (EV < mktcap) |
| Trailing P/E | 120.5x | Distorted: $136.8M net income in 2025 vs. $201.7M in 2024 — earnings trough, not structural |
| Forward P/E | 27.4x | Consensus FY2026 EPS ~$9.50; large gap vs trailing signals profitability inflection (shr-003) |
| P/B | 6.16x | Premium to book, driven by goodwill/intangibles from acquisitions |
| EV/EBITDA | 47.3x | Trailing; normalized EBITDA ~$235M |
| EV/Revenue | 12.25x | Expensive by any value metric |
| P/FCF (reported 2025) | 43.2x | |
| P/FCF (SBC-adj 2025) | 47.5x | SBC only 9.2% of FCF — manageable (see §5) |
| PEG | 1.28 | Uses forward estimate; fair for growth but not cheap |
Key observation (shr-003): Trailing P/E 120.5x vs. forward P/E 27.4x — a 340% gap. Market is pricing a significant 2026 earnings recovery. The question is whether that recovery is already in price or still underpriced.
| Item | 2025 | 2024 | Commentary |
|---|---|---|---|
| Total cash + ST investments | $639.6M | $852.3M | Declined due to $436M acquisition spend |
| Total debt (lease obligations only) | $17.5M | $15.2M | Zero financial debt |
| Net cash | ~$622M | ~$837M | Exceptional — no interest burden |
| Current ratio | 6.15x | — | Well above Graham's 2.0x |
| Working capital | $1,049M | $1,307M | Declined after acquisition |
| Equity (book) | $2,101M | $1,926M | |
| Goodwill + intangibles | $942M | $457M | +$484M jump — acquisition-driven |
| Tangible book value | $1,159M | $1,468M |
Flag: FY2025 acquisition spend of $436M drove goodwill from $330M to $644M (+$314M) and other intangibles from $128M to $298M (+$170M). The target is likely Lumos Networks or a process control bolt-on — not confirmed in yfinance metadata. This is post-merger integration risk. Cash position declined from $852M to $640M but remains very strong; zero financial debt means no covenant or liquidity risk.
F2 (current ratio 6.15x): Strong PASS.
Zero financial debt (only capital lease obligations of ~$17.5M against $639M cash). Net cash = ~$622M = ~4.8% of market cap. Fortress balance sheet. This is a genuine differentiator from larger WFE peers — ONTO can self-fund acquisitions and weather a multi-year semi downcycle without diluting shareholders.
| Year | Revenue | Gross Margin | Op Margin | Net Income | Reported FCF | SBC | SBC-adj FCF | SBC/FCF |
|---|---|---|---|---|---|---|---|---|
| 2022 | $1,005M | 53.7% | 23.6% | $223.3M | $118.3M | $24.4M | $93.9M | 20.6% |
| 2023 | $816M | 51.5% | 14.7% | $121.2M | $149.4M | $25.5M | $123.9M | 17.1% |
| 2024 | $987M | 52.2% | 19.9% | $201.7M | $213.8M | $28.6M | $185.2M | 13.4% |
| 2025 | $1,005M | 49.7% | 15.1% | $136.8M | $299.8M | $27.6M | $272.2M | 9.2% |
SBC Assessment (shr-001): SBC is meaningful but declining as a % of FCF (20.6% in 2022 → 9.2% in 2025). Annual SBC ~$27-29M on a $12.9B market cap = 0.21% dilution rate — low enough to be manageable. SBC-adjusted P/FCF is 47.5x (reported: 43.2x), a modest ~10% haircut. This is not the RDDT scenario where SBC doubled the effective multiple.
Quarterly revenue cycle (trough to recovery):
| Quarter | Revenue | Gross Margin | Op Margin |
|---|---|---|---|
| Q1 2025 | $266.6M | 53.7% | 24.1% |
| Q2 2025 | $253.6M | 48.2% | 15.2% |
| Q3 2025 | $218.2M | 50.7% | 12.7% |
| Q4 2025 | $266.9M | 46.4% | 7.8% |
| Q1 2026 | $291.9M | 50.1% | 13.3% |
Q3 2025 is the visible trough ($218M). Q1 2026 at $291.9M is the highest quarter in the dataset — clear recovery underway. However, Q4 2025 operating margin collapsed to 7.8% despite $267M revenue, suggesting acquisition integration costs or restructuring charges hit that quarter hard.
FCF vs. net income divergence: Reported FCF grew from $118M (2022) to $300M (2025) while net income declined from $223M to $137M — the reverse of what one would expect. This is driven by strong working capital release and non-cash charges (amortization of acquired intangibles: $39.4M in 2025). As intangible amortization rolls off, both GAAP and cash earnings will converge upward.
No dividend paid. Zero payout ratio. Growth company — capital returned via buybacks (FY2025: $75M buyback, FY2024: $25M, FY2022: $65M). This is a structural F4 FAIL for Graham defensive screening — not a negative signal for ONTO's specific business model. Per shr-004, apply Growth Stock Addendum rather than penalizing for deliberate reinvestment policy.
All insider activity in the last 6 months is stock award grants and vesting:
No open-market purchases or sales in the last 6 months. This is neutral — insiders are compensated in stock (standard) but there is zero evidence of insiders buying with personal capital at current prices. Per shr-002, open-market purchases would be the bullish signal; absence is neutral, not bearish.
Insider ownership: 0.6% (low). Institutional ownership: 100.2% (effectively fully institutionally held — standard for mid-cap tech).
| Metric | Value |
|---|---|
| Analyst count | 7 |
| Consensus | Strong Buy (7/7 buy-side) |
| Mean price target | $352.14 (+35.4% upside) |
| Low price target | $330.00 (+26.7% upside) |
| High price target | $370.00 (+42.1% upside) |
| Current price | $260.40 |
Seven analysts, all in the buy camp. Target range is tight ($330-$370), suggesting broad consensus on the recovery thesis. The mean PT of $352 implies the street is already pricing a 10%+ growth scenario in ONTO's Graham IV model — which at forward EPS of $9.50 would produce IV ~$270 at g=10%, still below the PT. Analysts are likely using DCF or comps rather than Graham's formula, implying higher embedded growth assumptions.
Caution: Only 7 analysts. Small coverage universe = higher PT revision risk on any miss.
Q1 2026 (reported ~May 2026):
Q4 2025 (reported ~Feb 2026):
Pattern: Two near-inline quarters. No positive surprise catalysts firing. The trough operating margin in Q4 2025 (7.8%) followed by recovery to 13.3% in Q1 2026 is consistent with the mid-cycle thesis. However, at $292M revenue and only 13.3% operating margin, ONTO is not yet back to the 24.1% it printed in Q1 2025 — the recovery is real but incomplete and below-cycle peaks.
Where ONTO sits in the WFE cycle:
ONTO serves process control (metrology and inspection) — the segment that benefits from:
Differentiation from AMAT/KLA: ONTO is smaller ($1B revenue vs. KLA's $10B+) and concentrated in overlay measurement and process control for backend/advanced packaging vs. leading-edge front-end etch/deposition. This gives a slightly different cycle profile — backend packaging is less lumpy than leading-edge node transitions.
Is mid-cycle slowdown in price? The stock crashed from $316 (52w high) to $89 (52w low) — a -72% drawdown that clearly priced in the trough. The subsequent +191% recovery to $260 reflects the street pricing the recovery. The stock has re-rated: it is NOT at trough valuation. At $89, forward P/E was likely <10x. At $260 with forward P/E 27.4x, the recovery is substantially priced in.
Risk: FY2025 $436M acquisition (goodwill roughly doubled) introduces integration risk. Q1 2026's 13.3% operating margin vs. Q1 2025's 24.1% on similar revenue ($292M vs $267M) suggests costs are elevated post-acquisition. If the acquisition doesn't deliver synergies, margin recovery stalls.
| Filter | Threshold | Actual | Result |
|---|---|---|---|
| F1 Adequate size | Revenue >$500M | $1,005M (2025) | PASS |
| F2 Financial condition | Current ratio ≥ 2.0 | 6.15x | PASS |
| F3 Earnings stability | Positive 10 years (4yr proxy) | Positive all 4 years | CONDITIONAL PASS (cyclical, not structural — trough 2023 was -46% EPS decline) |
| F4 Dividend record | 20yr uninterrupted | No dividend paid | FAIL (structural — growth co reinvesting, not a warning sign) |
| F5 Earnings growth | >33% over 10 years | -38.1% (2022→2025, cyclical) | FAIL (cyclical distortion: 2022 was a cycle peak, 2025 a trough — shr-017 warning applies) |
| F6 Moderate P/E | ≤ 15x trailing | 120.5x trailing / 27.4x forward | FAIL (premium multiple; not cyclical distortion — genuinely priced for growth) |
| F7 Moderate P/B | ≤ 1.5x (or P/E×P/B ≤ 22.5) | 6.16x P/B; P/E×P/B = 741x | FAIL |
Score: 2/7 (F1, F2 pass). F4 is structural/expected for a growth compounder — not informative. F5 is cyclically distorted (shr-017: trailing screen scores on cyclical peaks are traps — 2022 was the WFE peak). F6 and F7 are genuine premium-multiple fails: ONTO trades at a quality tech multiple, not a value multiple.
Critical distinction (shr-017): F5 FAIL here is partly cyclical (2022 peak → trough cycle) but F6/F7 FAILs are structural — ONTO at $260 is not cheap by any metric. At the $89 trough it would have passed F6 and approached F7 territory. The stock needed to be bought at the bottom, not now.
| Growth assumed | IV (trailing EPS $2.78) | MoS vs $260 | IV (forward EPS $9.50) | MoS vs $260 |
|---|---|---|---|---|
| 0% | $23.63 | -90.9% | $80.75 | -69.0% |
| 3% | $40.31 | -84.5% | $137.75 | -47.1% |
| 5% | $51.43 | -80.2% | $175.75 | -32.5% |
| 7.5% | $65.33 | -74.9% | $223.25 | -14.3% |
| 10% | $79.23 | -69.6% | $270.75 | +4.0% |
Break-even growth rates:
Key insight (shr-003): The massive trailing-vs-forward gap (42.6% vs 9.5% break-even) is exactly the signal described in shr-003 — the market is pricing a profitability inflection, not sustained high growth. The consensus sees FY2026 EPS recovering from $2.78 to ~$9.50 (+241%). If that recovery lands, ONTO at 27.4x forward P/E is reasonably priced. If recovery disappoints (integration costs persist, semi cycle re-softens), the stock has limited fundamental support.
Graham IV verdict: Only at forward EPS ~$9.50 AND assuming 10% sustained perpetual growth does the Graham formula produce a positive MoS (+4.0%). Graham's formula was designed for defensive value at 4-4.5% AAA bond yields — at current rates it understates fair value for quality compounders. Even so, there is no margin of safety here — the stock requires perfect execution of the recovery thesis to be fairly valued on any fundamental basis.
Annual SBC: ~$27.6M (2025). Trailing net income: $136.8M.
SBC is not a meaningful issue for ONTO. The company's dilution profile is clean: shares outstanding grew from 48.7M (Q1 2025) to 49.7M (Q1 2026) = +2.1% over 12 months. Buybacks partially offset issuance (FY2025: $75M repurchased). Net dilution is minimal.
| Category | Status | Notes |
|---|---|---|
| Recent price action | AMBER | +57% YTD — already re-rated from trough; not buying at value |
| Earnings/news | AMBER | Q1 2026 inline — no positive catalyst surprise; acquisition integration ongoing |
| Insider activity | NEUTRAL | Only grants/vesting; no open-market buys or sells |
| Analyst changes | GREEN | All strong buy; mean PT $352 (+35% upside) |
| Dividend status | N/A | Not applicable (growth co) |
| Balance sheet | GREEN | Net cash $622M, zero financial debt |
| Short interest | GREEN | 2.8% of float, DTC 1.1 — no squeeze/short pressure, negligible |
| Goodwill risk | RED | Goodwill doubled to $644M via $436M acquisition; integration risk unverified |
| Cycle/macro | AMBER | Semi recovery underway but Q4 2025 margin collapse post-acquisition is concerning |
Overall shr-020: Mixed. The clean balance sheet and low short interest are positives. The acquisition integration risk (goodwill doubled, margins compressed in Q4 2025), the fact that it has already re-rated +191% from trough, and no margin of safety at current price are the key negatives.
VERDICT: RED
Reasoning:
Not a value screen candidate at current price. ONTO at $260 fails 5 of 7 Graham filters. F6 and F7 failures are structural/genuine — this is a growth-quality stock trading at a premium multiple (27.4x forward, 47.5x SBC-adj P/FCF), not a depressed cyclical.
Mid-cycle slowdown is already in price. The stock recovered +191% from its $89 trough. The thesis of "mid-cycle slowdown still in price" was valid at $89-120, not at $260. The market has fully recognized the recovery and priced forward EPS of ~$9.50.
Graham IV shows no margin of safety. Even using forward EPS $9.50 (the recovery case), the Graham formula requires 10% sustained perpetual growth to break even at $260. That's a tight margin with no buffer for execution risk, integration costs, or a second semi cycle downtick.
Acquisition risk is unpriced. FY2025's $436M acquisition (goodwill doubled) is visible in the numbers but not yet integrated: Q4 2025 showed 7.8% operating margin on $267M revenue, well below prior-year levels. If the acquisition creates a cost structure permanently higher by 5-8 margin points, the forward EPS of $9.50 is too optimistic.
SBC is not material — shr-001 applies but the impact is minor (~10% haircut to FCF multiples). Not the deciding factor.
Analysts bullish but coverage thin. 7 analysts, all buys, mean PT $352. Small coverage base amplifies revision risk on any miss. Mean PT implies 35% upside — real but concentrated in a specific recovery scenario landing.
Watchlist price: $130-150 range. At $130 with forward EPS $9.50, forward P/E ~13.7x — approaching Graham F6 pass territory. At $150 with forward EPS intact, EV/Revenue would be ~5x and Graham IV at g=10% (forward) would show ~+80% margin of safety. A re-test of the $140s would occur if: (a) semi cycle re-softens in H2 2026, (b) acquisition integration disappoints with Q2/Q3 2026 margin prints <10%, or (c) macro headwinds (tariffs, export controls to China) cut equipment spend. Monitor quarterly margins as the leading indicator — recovery to 20%+ operating margin would confirm the thesis; if margins stay in the 10-14% range post-integration, the EPS recovery stalls.
Not recommended for current EUR satellite portfolio (~$3K EUR, 4 active positions). Even if ONTO is a high-quality company (which it is), it requires exact execution of a recovery thesis at a premium multiple — the opposite of the Graham margin-of-safety framework. Capital better deployed in positions with positive MoS. Re-evaluate at $130-150.
VERDICT LINE: RED — rerated +191% from trough, no Graham margin of safety at $260 (forward P/E 27.4x requires 9.5% perpetual growth just to break even), acquisition integration risk unresolved; watchlist entry at $130-150.