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When InvestingPro’s Fair Value models identified Onto Innovation Inc. (NYSE:ONTO) as significantly undervalued in May 2024, the semiconductor equipment manufacturer was trading at $133.08. The subsequent price action has demonstrated the power of data-driven valuation analysis, with investors who followed the signal enjoying substantial returns.
Onto Innovation specializes in process control tools and software for semiconductor manufacturing, positioning it at the heart of the technology sector’s growth. When InvestingPro’s models flagged the opportunity, the company was showing strong fundamentals with annual revenue of $845.5 million and EBITDA of $193.5 million. The stock had demonstrated positive momentum in the preceding months, yet our analysis suggested significant untapped value.
The Fair Value analysis proved prescient as ONTO’s share price demonstrated strong performance, delivering a 41.69% return over the following months. This movement was supported by impressive fundamental growth, with revenue expanding to $987.3 million and EBITDA reaching $249.4 million in the most recent quarter. The company’s earnings per share grew from $2.83 to $4.09, validating InvestingPro’s initial assessment.
Recent developments have reinforced the company’s strong position. Onto Innovation reported better-than-expected Q4 2024 results and has made strategic moves including the acquisition of Lumina Instruments and Kulicke and Soffa (NASDAQ:KLIC)’s lithography unit. While several analysts have adjusted their price targets, they maintain positive ratings, with Stifel and Cantor Fitzgerald expressing continued confidence in the company’s growth trajectory.
InvestingPro’s Fair Value methodology combines multiple valuation approaches, including discounted cash flow analysis, peer comparisons, and market sentiment indicators. This comprehensive approach helps investors identify opportunities where market prices diverge from fundamental value. For ONTO, the model accurately predicted a significant upside potential, with the stock’s performance confirming the analysis.
For investors seeking similar opportunities, InvestingPro continues to identify potentially overvalued stocks that may be due for correction. These insights are available on our regularly updated Most overvalued list. To access detailed Fair Value analysis, real-time alerts, and comprehensive financial metrics, consider exploring InvestingPro’s premium features for more informed investment decisions.