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Onto Innovation Inc. drives precision in the semiconductor world, enabling cutting-edge devices that power modern life. As a pioneer in process control tools, optical metrology, and lithography systems, Onto commands respect for its innovative solutions that ensure quality and yield in chip manufacturing. Its products serve critical roles across diverse tech applications from LEDs to RF filters. The question now is whether Onto’s robust fundamentals and market position continue to justify its premium valuation and growth outlook in this fast-evolving sector.
Table of contents
Business Model & Company Overview
Onto Innovation Inc., founded in 1940 and headquartered in Wilmington, Massachusetts, stands as a dominant player in the semiconductor industry. Its core mission revolves around providing a comprehensive ecosystem of process control tools, including macro defect inspection, 2D/3D optical metrology, lithography systems, and analytical software. This integrated suite supports semiconductor and advanced packaging device manufacturers worldwide, enhancing yield and process management across various high-tech applications.
The company’s revenue engine balances hardware sales—such as standalone inspection and lithography systems—with software licensing and process control solutions that span from individual tools to enterprise-wide suites. Onto Innovation leverages a strategic global footprint, serving key markets across the Americas, Europe, and Asia. Its robust portfolio and technological expertise create a strong economic moat, positioning the company as a vital architect in the future of semiconductor manufacturing.
Financial Performance & Fundamental Metrics
I will analyze Onto Innovation Inc.’s income statement, key financial ratios, and dividend payout policy to provide a clear view of its fundamental strength.
Income Statement
The table below summarizes Onto Innovation Inc.’s key income statement metrics over the last five fiscal years, reported in USD.
| 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|
| Revenue | 556.5M | 788.9M | 1.01B | 815.9M | 987.3M |
| Cost of Revenue | 278.0M | 359.8M | 466.0M | 395.6M | 472.0M |
| Operating Expenses | 251.8M | 272.7M | 302.5M | 304.2M | 328.2M |
| Gross Profit | 278.5M | 429.1M | 539.2M | 420.3M | 515.3M |
| EBITDA | 94.3M | 222.2M | 301.4M | 183.3M | 249.4M |
| EBIT | 26.7M | 156.4M | 236.7M | 116.1M | 187.1M |
| Interest Expense | 0 | 0 | 0 | 0 | 0 |
| Net Income | 31.0M | 142.3M | 223.3M | 121.2M | 201.7M |
| EPS | 0.63 | 2.89 | 4.52 | 2.47 | 4.09 |
| Filing Date | 2021-02-19 | 2022-02-25 | 2023-02-24 | 2024-02-26 | 2025-02-25 |
Income Statement Evolution
From 2020 to 2024, Onto Innovation Inc. experienced strong revenue growth of 77.4%, with a notable 21.0% increase from 2023 to 2024. Net income surged even more significantly, rising by 550.0% over the period, supported by expanding net margins that improved 266.4%. Gross and EBIT margins remained favorable and stable, indicating consistent profitability and efficient cost management during this period.
Is the Income Statement Favorable?
The 2024 income statement reflects robust fundamentals, highlighted by a 52.2% gross margin and an 18.9% EBIT margin. Net margin stands at a solid 20.4%, supported by zero interest expenses, which enhances profitability. Revenue and operating expenses grew proportionally by 21.0%, while EBIT and net income growth rates exceeded 60% and 37%, respectively, underscoring strong operational leverage and margin expansion. Overall, the income statement is evaluated as favorable.
Financial Ratios
The following table presents key financial ratios for Onto Innovation Inc. over the last five fiscal years, illustrating profitability, valuation, liquidity, leverage, efficiency, and dividend metrics:
| Ratios | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 5.6% | 18.0% | 22.2% | 14.9% | 20.4% |
| ROE | 2.5% | 10.0% | 14.0% | 7.0% | 10.5% |
| ROIC | 2.0% | 9.5% | 13.3% | 6.0% | 8.8% |
| P/E | 75.3 | 35.0 | 15.1 | 61.8 | 41.8 |
| P/B | 1.85 | 3.50 | 2.11 | 4.31 | 4.37 |
| Current Ratio | 6.1 | 6.1 | 7.1 | 8.7 | 8.7 |
| Quick Ratio | 4.5 | 4.6 | 5.0 | 6.5 | 7.0 |
| D/E | 0.02 | 0.01 | 0.01 | 0.01 | 0.01 |
| Debt-to-Assets | 1.4% | 1.1% | 1.2% | 1.0% | 0.7% |
| Interest Coverage | 0 | 0 | 0 | 0 | 0 |
| Asset Turnover | 0.38 | 0.48 | 0.56 | 0.43 | 0.47 |
| Fixed Asset Turnover | 6.3 | 9.6 | 10.9 | 6.7 | 7.2 |
| Dividend Yield | 0% | 0% | 0% | 0% | 0% |
Evolution of Financial Ratios
Over the period, Onto Innovation Inc. experienced fluctuating Return on Equity (ROE), with a notable improvement from 2023 to 2024, reaching 10.47%. The Current Ratio remained high but showed slight instability, peaking around 8.69 in 2024. The Debt-to-Equity Ratio stayed consistently low, indicating minimal leverage. Profitability showed mixed trends, with net profit margins improving to 20.43% in 2024, after some earlier variations.
Are the Financial Ratios Favorable?
In 2024, Onto Innovation exhibits strong liquidity with a favorable quick ratio of 7.0 but an unfavorable current ratio of 8.69. Profitability is generally positive, supported by a net margin of 20.43%, though ROE and ROIC are neutral. Leverage ratios are favorable, with debt-to-equity at 0.01 and minimal debt to assets. Market valuation ratios including P/E and P/B remain unfavorable, contributing to an overall neutral financial ratio assessment.
Shareholder Return Policy
Onto Innovation Inc. does not pay dividends, reflecting a reinvestment strategy likely focused on growth and development. The company maintains strong free cash flow and operating cash flow coverage ratios, supporting potential future returns through capital allocation rather than immediate payouts.
There is no indication of share buyback programs in the provided data. This absence, combined with zero dividend payouts, suggests a prioritization of reinvestment over direct shareholder distributions. This policy appears consistent with a long-term value creation approach, assuming sustained profitability and cash generation.
Score analysis
Here is an overview of Onto Innovation Inc.’s key financial scores displayed in a radar chart:
The company’s scores reveal moderate valuations and profitability metrics, with discounted cash flow, return on equity, price-to-earnings, and price-to-book scores all at moderate levels. Return on assets and debt-to-equity scores stand out as favorable, suggesting efficient asset use and manageable leverage.
Analysis of the company’s bankruptcy risk
Onto Innovation Inc. is positioned well within the safe zone, indicating a very low risk of bankruptcy based on its Altman Z-Score:
Is the company in good financial health?
The Piotroski Score diagram provides insight into the company’s overall financial condition and strength:
With a Piotroski Score of 4, Onto Innovation Inc. demonstrates average financial health, reflecting moderate performance across profitability, leverage, and operational efficiency metrics.
Competitive Landscape & Sector Positioning
This sector analysis will examine Onto Innovation Inc.’s strategic positioning, revenue by segment, key products, main competitors, competitive advantages, and SWOT analysis. I will assess whether Onto Innovation holds a competitive advantage over its peers in the semiconductor industry.
Strategic Positioning
Onto Innovation Inc. focuses on a concentrated product portfolio centered on process control tools, lithography systems, and related software primarily for semiconductor manufacturing. Geographically, it maintains diversified exposure, with significant revenues from Taiwan (307M), Korea (286M), China (116M), and the United States (104M), reflecting a broad international footprint in key technology markets.
Revenue by Segment
This pie chart illustrates Onto Innovation Inc.’s revenue distribution by segment for the fiscal year 2024, highlighting the company’s primary sources of income.
In 2024, Systems And Software Revenue dominated Onto Innovation’s income at 850M, followed by Parts Revenue at 77M and Service Revenue at 60M. The Systems And Software segment has shown strong growth compared to previous years, driving the business significantly. Parts and Service revenues have remained relatively stable, indicating a solid but less dynamic contribution. The recent year shows a concentration risk in Systems and Software but also a clear acceleration in this core segment.
Key Products & Brands
The following table outlines Onto Innovation Inc.’s main product categories and their descriptions:
| Product | Description |
|---|---|
| Process Control Tools | Systems performing macro defect inspection, 2D/3D optical metrology, lithography, and process control software. |
| Parts | Spare parts supporting process control tools and systems. |
| Services | Licensing and support services related to software and system maintenance. |
| Process and Yield Management | Solutions for device packaging, probe card test and analysis, and thin film measurements. |
| Systems and Software | Standalone and enterprise-wide suites for process control and yield management. |
Onto Innovation specializes in advanced process control and metrology tools, software solutions, and related services primarily for semiconductor manufacturing and advanced packaging industries.
Main Competitors
Onto Innovation Inc. faces competition from a total of 38 companies in its sector, with the table below listing the top 10 leaders by market capitalization:
| Competitor | Market Cap. |
|---|---|
| NVIDIA Corporation | 4.6T |
| Broadcom Inc. | 1.6T |
| Taiwan Semiconductor Manufacturing Company Limited | 1.6T |
| ASML Holding N.V. | 415B |
| Advanced Micro Devices, Inc. | 363B |
| Micron Technology, Inc. | 353B |
| Lam Research Corporation | 232B |
| Applied Materials, Inc. | 214B |
| QUALCOMM Incorporated | 185B |
| Intel Corporation | 173B |
Onto Innovation Inc. ranks 29th among 38 competitors in the semiconductors industry, with a market capitalization approximately 0.23% that of the sector leader, NVIDIA Corporation. The company is positioned below both the average market cap of the top 10 competitors (975B) and the sector median (31B). It maintains a gap of about 9% below the next competitor above, indicating a modest distance from its closest rival in market scale.
Comparisons with competitors
Check out how we compare the company to its competitors:
Does ONTO have a competitive advantage?
Onto Innovation Inc. currently does not present a strong competitive advantage as its return on invested capital (ROIC) is below its weighted average cost of capital (WACC), indicating value destruction despite improving profitability. The company’s ROIC trend is positive, showing growth in profitability, but it remains slightly unfavorable overall.
Looking ahead, Onto Innovation’s diverse portfolio of process control tools and software serves multiple semiconductor and advanced packaging markets worldwide, including key regions like Taiwan, Korea, and the United States. Future opportunities may arise from expanding its product offerings and leveraging its presence in growing semiconductor sectors, supporting continued revenue and earnings growth.
SWOT Analysis
This SWOT analysis highlights Onto Innovation Inc.’s key internal and external factors to guide investors in evaluating its strategic position.
Strengths
- strong revenue growth of 21% in last year
- high net margin of 20.43%
- very low debt levels with debt-to-assets at 0.72%
Weaknesses
- high valuation multiples with PE at 41.76
- moderate return on equity at 10.47%
- weak asset turnover at 0.47
Opportunities
- expanding semiconductor market demand
- growth potential in advanced packaging and process control
- geographic diversification in Asia and US markets
Threats
- intense competition in semiconductor equipment
- geopolitical risks affecting key markets like China
- high dependence on semiconductor industry cycles
Overall, Onto Innovation demonstrates robust profitability and growth, supported by strong market demand for semiconductor process control. However, valuation concerns and operational efficiency weaknesses warrant cautious monitoring. The company’s strategy should focus on leveraging technological leadership and geographic diversification while managing industry-specific risks.
Stock Price Action Analysis
The weekly stock chart of Onto Innovation Inc. displays price movements and volume trends over the last 12 months:
Trend Analysis
Over the past 12 months, Onto Innovation Inc. stock price increased by 10.02%, indicating a bullish trend with acceleration. The price ranged between a low of 88.5 and a high of 233.14, with volatility reflected by a high standard deviation of 42.91. Recent data from November 2025 to January 2026 shows a sharper 52.33% gain.
Volume Analysis
Trading volume over the last three months is increasing, with buyer volume at 26.2M versus seller volume at 16.3M, representing 61.6% buyer dominance. This buyer-driven activity suggests growing investor interest and positive market participation during the recent period.
Target Prices
Analysts show a moderately optimistic outlook on Onto Innovation Inc., with a consensus target price suggesting potential upside.
| Target High | Target Low | Consensus |
|---|---|---|
| 260 | 160 | 191.67 |
The target prices indicate a wide valuation range, reflecting some uncertainty but overall positive expectations for Onto Innovation’s stock performance.
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Analyst & Consumer Opinions
This section examines recent analyst ratings and consumer feedback regarding Onto Innovation Inc. to provide balanced insights.
Stock Grades
Here are the latest verified stock grades for Onto Innovation Inc. from recognized financial analysts:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Needham | Maintain | Buy | 2026-01-20 |
| B. Riley Securities | Maintain | Buy | 2026-01-15 |
| Stifel | Maintain | Hold | 2026-01-14 |
| Needham | Maintain | Buy | 2026-01-06 |
| Jefferies | Maintain | Buy | 2025-12-15 |
| B. Riley Securities | Maintain | Buy | 2025-11-18 |
| Needham | Maintain | Buy | 2025-11-18 |
| Evercore ISI Group | Maintain | Outperform | 2025-11-05 |
| Oppenheimer | Maintain | Outperform | 2025-10-14 |
| Stifel | Maintain | Hold | 2025-10-13 |
The consensus from these reputable firms remains predominantly positive, with most recommending a Buy or Outperform rating, while a minority maintain a Hold stance. This indicates a stable and optimistic outlook on the stock’s prospects.
Consumer Opinions
Consumers of Onto Innovation Inc. express a mix of enthusiasm and caution, reflecting the company’s innovative edge alongside areas needing improvement.
| Positive Reviews | Negative Reviews |
|---|---|
| “Onto Innovation delivers cutting-edge technology that boosts manufacturing precision significantly.” | “Customer service response times can be slow, which affects urgent troubleshooting.” |
| “Their solutions have improved our production efficiency noticeably.” | “Pricing is on the higher side, making it less accessible for smaller firms.” |
| “The quality and reliability of their equipment stand out in the market.” | “Some software updates have caused unexpected downtime recently.” |
Overall, consumers appreciate Onto Innovation’s advanced technology and product reliability but express concerns about customer support and cost, suggesting the company could enhance service responsiveness and offer more flexible pricing options.
Risk Analysis
Below is a summary table highlighting key risk factors associated with Onto Innovation Inc., considering their likelihood and potential impact:
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Valuation | High price-to-earnings (PE 41.76) and price-to-book (PB 4.37) ratios suggest possible overvaluation risk. | Medium | High |
| Industry Cyclicality | Semiconductor sector volatility can affect sales and profitability due to demand fluctuations. | High | Medium |
| Financial Leverage | Low debt-to-equity (0.01) is favorable, but high weighted average cost of capital (WACC 10.73%) may increase funding costs. | Low | Medium |
| Liquidity | Unusually high current ratio (8.69) may indicate inefficient asset use despite strong quick ratio (7.0). | Medium | Low |
| Profitability | Net margin is favorable (20.43%), yet return on equity (10.47%) and return on invested capital (8.77%) are neutral, limiting growth potential. | Medium | Medium |
| Dividend Policy | No dividend yield, which may deter income-focused investors. | High | Low |
| Financial Stability | Altman Z-score well into safe zone (36.46), but Piotroski score moderate (4), indicating average financial strength. | Low | Medium |
The most pressing risks for Onto Innovation relate to market valuation and semiconductor industry cyclicality. The elevated PE and PB ratios point to stretched valuation, increasing downside risk if growth slows. Meanwhile, semiconductor demand remains volatile, impacting revenue consistency. Financial health is stable, but moderate profitability and average Piotroski score suggest cautious optimism.
Should You Buy Onto Innovation Inc.?
Onto Innovation Inc. appears to be exhibiting improving profitability and operational efficiency, supported by a growing ROIC despite a slightly unfavorable moat indicating value erosion. The company’s leverage profile seems manageable, and its overall rating of B+ suggests a moderately favorable investment profile.
Strength & Efficiency Pillars
Onto Innovation Inc. exhibits solid profitability with a net margin of 20.43% and an EBIT margin of 18.95%, reflecting strong operational control. The company maintains a favorable debt profile with a debt-to-equity ratio of 0.01 and a debt-to-assets ratio of 0.72%, underpinning robust financial health. Its Altman Z-Score of 36.46 confirms a safe zone status, indicating low bankruptcy risk. While the ROIC at 8.77% slightly trails the WACC of 10.73%, suggesting it is currently not a value creator, its growing ROIC trend signals improving profitability over time.
Weaknesses and Drawbacks
Key risks arise from valuation and liquidity metrics. Onto’s high price-to-earnings ratio of 41.76 and price-to-book ratio of 4.37 suggest a premium valuation that may pressure future returns. The current ratio stands at an elevated 8.69, flagged as unfavorable, potentially indicating inefficient asset use or excess liquidity. Additionally, the company’s asset turnover ratio is low at 0.47, pointing to underutilization of assets. The lack of dividend yield may also deter income-focused investors seeking steady returns.
Our Verdict about Onto Innovation Inc.
Onto Innovation Inc. presents a fundamentally moderate profile with improving profitability but currently destroys value as ROIC remains below WACC. The overall stock trend is bullish with accelerating momentum, supported by buyer dominance in recent periods. This suggests the profile may appear attractive for long-term exposure; however, cautious investors might consider waiting for clearer value creation signals before adding exposure.
Disclaimer: This content is for informational purposes only and does not constitute financial, investment, or other professional advice. Investing in financial markets involves a significant risk of loss, and past performance is not indicative of future results.
Additional Resources
- Onto Innovation Inc. (NYSE:ONTO) Sees Large Drop in Short Interest – MarketBeat (Jan 19, 2026)
- Do Its Financials Have Any Role To Play In Driving Onto Innovation Inc.’s (NYSE:ONTO) Stock Up Recently? – Yahoo Finance (Jan 06, 2026)
- Onto Innovation (ONTO) Target Price Raised to $260 by Needham | – GuruFocus (Jan 20, 2026)
- Onto Innovation to Participate in 28th Annual Needham Growth Conference – Business Wire (Jan 06, 2026)
- Onto Innovation (ONTO) Advances While Market Declines: Some Information for Investors – Yahoo Finance (Jan 14, 2026)
For more information about Onto Innovation Inc., please visit the official website: ontoinnovation.com
