ARM (NASDAQ:ARM) and ON Semiconductor (NASDAQ:ON) Critical Analysis

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

Risk and Volatility

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

Insider and Institutional Ownership

7.5% of ARM shares are owned by institutional investors. Comparatively, 97.7% of ON Semiconductor shares are owned by institutional investors. 0.3% of ON Semiconductor shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares ARM and ON Semiconductor”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARM	$4.01 billion	38.26	$792.00 million	$0.75	192.96
ON Semiconductor	$7.08 billion	3.12	$1.57 billion	$1.44	36.76

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

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARM	2	6	19	1	2.68
ON Semiconductor	0	11	14	0	2.56

ARM presently has a consensus price target of $152.76, indicating a potential upside of 5.56%. ON Semiconductor has a consensus price target of $55.12, indicating a potential upside of 4.12%. Given ARM’s stronger consensus rating and higher possible upside, equities research analysts clearly believe ARM is more favorable than ON Semiconductor.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ARM	19.76%	17.97%	13.42%
ON Semiconductor	9.51%	17.40%	10.72%

Summary

ARM beats ON Semiconductor on 10 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 ON Semiconductor

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