Onto Innovation Q3 Earnings: Is NYSE:ONTO Manipulating Earnings?

in EARNINGS/INVESTING IDEAS by

Onto Innovation Inc. (NYSE:ONTO) is scheduled to report Q3 earnings results after markets close for trading on November 2, 2020.

The company is expected to report earnings of $0.36/share on revenue of $128.1 million. The consensus earnings per share (EPS) of $0.36/share is based on a poll of 5 analysts and represents a growth in eps of 15.5% over the same quarter last year, when the company reported earnings of $0.31/share.

The revenue forecast of $128.1 million based on a poll of 5 analysts implies a year-over-year (YoY) growth in revenue of 103.5%. Last year the company reported $62.935 million in revenue for the quarter.

Expected to report EPS growth of 15.5% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $128.08 $62.94 103.5%
EPS $0.36 $0.31 15.5%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 4 tracked quarters, and missed expectations 1 quarters.

What are your expectations from Onto Innovation Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.35 $0.42 20.9% Beat
Q1, 2020 $0.33 $0.39 19.1% Beat
Q4, 2019 $0.39 $0.41 6.2% Beat
Q3, 2019 $0.36 $0.31 −13.9% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 27, 2020, the stock price reacted by falling −1.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $39.29 $38.61 −1.7% Decline
May 5, 2020 $30.45 $30.72 0.9% Increase
February 6, 2020 $41.08 $38.45 −6.4% Decline
November 7, 2019 $33.71 $34.82 3.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −0.32, the model suggests that the company is likely an earnings manipulator. A value of −0.32 implies a 37.5% chance of earnings manipulation.

Fundamentals And Technical Analysis

Onto Innovation Inc. is currently trading at $33.25/share, down −2.7% for the day. The company is trading at approximately 78.2% of its 52-week high of $42.50/share. The company’s stock price is down −13.9% since the last earnings report and down −0.9% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 58.45 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:ONTO Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −198.62 and a forward P/E multiple of 18.87.

Onto Innovation Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.33. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 27, 2020
Stock Price (Current) $33.25
P/E Ratio −198.6x
P/E Ratio (Fwd) 18.9x
PEG Ratio 1.8
Total Debt / Total Capital 1.3%
Levered Free Cash Flow $48.47 million
EV / EBITDA 17.0x

Finbox

Onto Innovation Inc. is a small-cap stock with a market capitalization of $1.623 billion and a total enterprise value of $1.334 billion. The company operates in the Information Technology sector and the Semiconductors & Semiconductor Equipment industry.

Onto Innovation Inc. designs, develops, manufactures, and supports process control tools that performs macro-defect inspection and metrology, lithography systems, and process control analytical software used by semiconductor and advanced packaging device manufacturers worldwide. The company offers process and yield management solutions used in bare silicon wafer production and processing facilities, and device packaging and test facilities through standalone systems for macro-defect inspection, packaging lithography, probe card test and analysis, and transparent and opaque thin film measurements. It also provides spare parts and software licensing services. The company was formerly known as Rudolph Technologies, Inc. Onto Innovation Inc. was founded in 1940 and is headquartered in Wilmington, Massachusetts.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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