Analytical Comparison: ON Semiconductor Corporation (ON) vs. At Enerplus Corporation (ERF)

The shares of ON Semiconductor Corporation have increased by more than 32.77% this year alone. The shares recently went up by 0.92% or $0.2 and now trades at $21.92. The shares of Enerplus Corporation (NYSE:ERF), has slumped by -19.59% year to date as of 11/26/2019. The shares currently trade at $6.24 and have been able to report a change of 4.52% over the past one week.

The stock of ON Semiconductor Corporation and Enerplus Corporation were two of the most active stocks on Tuesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. ON has an EBITDA margin of 19.61%, this implies that the underlying business of ON is more profitable. The ROI of ON is 11.40% while that of ERF is 13.60%. These figures suggest that ERF ventures generate a higher ROI than that of ON.

Cash Flow

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, ON’s free cash flow per share is a positive 2.24, while that of ERF is negative -8.35.

Liquidity and Financial Risk

The ability of a company to meet up with its short-term obligations and be able to clear its longer-term debts is measured using Liquidity and leverage ratios. The current ratio for ON is 1.50 and that of ERF is 0.90. This implies that it is easier for ON to cover its immediate obligations over the next 12 months than ERF. The debt ratio of ON is 1.12 compared to 0.35 for ERF. ON can be able to settle its long-term debts and thus is a lower financial risk than ERF.

Valuation

ON currently trades at a forward P/E of 13.61, a P/B of 2.80, and a P/S of 1.60 while ERF trades at a forward P/E of 6.62, a P/B of 0.97, and a P/S of 1.51. This means that looking at the earnings, book values and sales basis, ERF is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of ON is currently at a -7.98% to its one-year price target of 23.82. Looking at its rival pricing, ERF is at a -54.59% relative to its price target of 13.74.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), ON is given a 2.20 while 2.00 placed for ERF. This means that analysts are more bullish on the outlook for ON stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for ON is 4.67 while that of ERF is just 2.97. This means that analysts are more bullish on the forecast for ERF stock.

Conclusion

The stock of ON Semiconductor Corporation defeats that of Enerplus Corporation when the two are compared, with ON taking 5 out of the total factors that were been considered. ON happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, ON is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for ON is better on when it is viewed on short interest.