ON Semiconductor Corp. (NASDAQ:ON)

Return on Assets (ROA)

The ROA values demonstrate an overall upward trend from early 2020 through to March 2024. Starting at 2.51% in April 2020, the metric experienced a brief decline, turning slightly negative to -0.21% in October 2020. Subsequently, a consistent and significant increase is observed, rising steadily from 2.18% at the end of 2019 to a peak of 16.76% in September 2023. Following this peak, ROA values remain relatively stable with a slight decrease, finishing at 16.13% by March 2024. This trend suggests enhanced efficiency in asset utilization over the period, particularly after the initial downturn in 2020.

Financial Leverage

Financial leverage ratios show a declining trajectory throughout the entire period under review. Beginning at 2.37 in March 2019 and reaching its highest point of 2.94 in July 2020, the ratio steadily decreases thereafter. The decline continues progressively, falling below 2.0 starting from April 2022 and reaching a low of 1.66 by March 2024. This reduction in leverage indicates a gradual deleveraging or more conservative capital structure adoption, which may reduce financial risk over time.

Return on Equity (ROE)

ROE trends closely mirror those of ROA, albeit with more pronounced fluctuations. Beginning at 6.41% in April 2020, ROE dips to a negative value of -0.61% in October 2020, reflecting a period of reduced profitability or increased losses for equity holders. From this point onward, a strong recovery and growth trend is evident, with ROE climbing sharply to a peak of 31.94% in July 2022. Although there is some variability post-peak, values remain elevated, maintaining levels above 26% through March 2024. The high ROE in tandem with declining leverage suggests improvements in operational profitability rather than reliance on increased financial gearing.

The analysis of the quarterly financial ratios reveals several noteworthy trends over the examined periods.

Net Profit Margin (%)

The net profit margin experienced fluctuations in the earlier periods, initially manifesting a modest positive margin and even dipping to a negative value around mid-2020. From late 2020 onward, there was a substantial and consistent increase, with margins rising from approximately 3.87% to over 26% by early 2024. This upward trajectory indicates improved profitability and effective cost management over time.

Asset Turnover (ratio)

Asset turnover showed moderate volatility with values ranging between 0.55 and 0.73 in the earlier periods. After peaking near 0.73 around late 2022, the ratio gradually decreased to approximately 0.60 by early 2024. This pattern suggests a relative reduction in the efficiency with which assets are used to generate sales during recent periods, possibly reflecting changes in asset base or sales volume.

Financial Leverage (ratio)

Financial leverage exhibited a declining trend over the entire timeframe, decreasing from around 2.60 in mid-2019 to approximately 1.66 by early 2024. This reduction indicates a gradual deleveraging, implying either a decrease in debt levels relative to equity or an accumulation of equity, which could reduce financial risk and interest obligations.

Return on Equity (ROE) (%)

Return on equity mirrored the profitability improvements seen in net profit margin. Initially volatile with some negative results, ROE increased significantly from approximately 6.41% in early periods to a peak of nearly 32% by 2022. Subsequently, ROE stabilized around the high 20% range into 2024, demonstrating strong returns generated on shareholders' equity over time.

Overall, the financial ratios collectively suggest an improving profitability profile alongside cautious management of leverage. While asset utilization efficiency shows some decline in recent quarters, the enhanced profitability and reduced financial risk contribute to a robust return on equity throughout the most recent periods.

The analysis of the quarterly financial data reveals multiple discernible trends over the observed periods.

Tax Burden

The tax burden ratio exhibited fluctuations initially, with values ranging notably around early periods. Since the quarter ending April 1, 2022, it has demonstrated relative stability, maintaining values close to 0.8 to 0.86, indicating a consistent portion of earnings retained after taxes over recent periods.

Interest Burden

The interest burden ratio showed significant volatility at the beginning, including a negative value in October 2019, suggesting a period of financial strain or unusual interest-related events. From late 2019 onwards, the ratio improved steadily, approaching near neutrality and stabilization around 0.96 to 0.98 in the most recent quarters, indicating reduced impact of interest expenses on earnings.

EBIT Margin

There is a marked upward trajectory in the EBIT margin, starting from low single digits and gradually increasing to over 30% in recent quarters. This improvement reflects enhanced operational efficiency and profitability before interest and taxes, suggesting effective cost control and/or revenue growth over time.

Asset Turnover

The asset turnover ratio showed minor variations but relatively modest levels throughout the periods, generally falling between 0.55 and 0.73. There is a subtle declining trend in the most recent quarters, possibly indicating a slight reduction in the efficiency of asset utilization to generate revenue.

Financial Leverage

Financial leverage decreased consistently from above 2.6 in early periods to approximately 1.66 by the latest quarter. This steady decline suggests a strategic reduction in reliance on debt financing, leading to a potentially more conservative capital structure and lower financial risk.

Return on Equity (ROE)

ROE demonstrated considerable volatility in earlier periods, including negative returns in late 2019, but thereafter showed a strong upward momentum. It peaked near 32% and then slightly moderated, stabilizing around the high 20% range in recent quarters, which indicates substantial growth in shareholder value and improved profitability leveraging both operational gains and capital structure adjustments.

Overall, the data reflect improvements in operational profitability, prudent financial management characterized by reduced leverage and interest burdens, and enhanced returns to equity holders. Slight decreases in asset turnover might warrant monitoring, but do not currently undermine the positive trends in profitability and financial stability.

The analysis of the quarterly financial metrics reveals distinct trends in profitability and operational efficiency over the observed periods.

Net Profit Margin (%)

The net profit margin experienced an initial fluctuation with a low point of -0.37% around October 2019, followed by a steady upward trajectory starting from March 2020 at 3.84%. The margin consistently improved through subsequent quarters, reaching double digits by December 2021 (10.61%) and continuing to climb thereafter. The most recent figures indicate a robust profit margin around 26.5% to 26.7% in the last quarters of 2023 and early 2024, suggesting enhanced cost management and revenue generation capabilities.

Asset Turnover (ratio)

The asset turnover ratio showed a declining trend initially from 0.65 in April 2020 to a low near 0.55 by September 2019, reflecting a decrease in revenue generated per unit of asset. However, it recovered incrementally to about 0.73 by December 2022, before gradually tapering down again to approximately 0.6 by March 2024. This pattern may imply fluctuations in asset utilization efficiency, with some improvement mid-term but overall a moderate reduction toward the end of the series.

Return on Assets (ROA) (%)

Return on assets followed a trend analogous to the net profit margin, with a nadir close to -0.21% in October 2019, indicating a period of negative profitability. From April 2020 onward, ROA showed consistent gains, surpassing 10% by the end of 2021 and reaching levels above 16% through late 2023 and early 2024. This enhancement in ROA reflects improved effective use of company assets to generate earnings over time.

Overall, the data indicates a phase of recovery and strengthening profitability beginning in early 2020, characterized by significant improvements in net profit margin and ROA. While asset turnover showed some variability, it did not follow the strong upward momentum of the profit-based metrics, suggesting that the company’s profitability gains may be driven more by margin improvements rather than increased asset efficiency alone.

The financial data reflects a series of trends over multiple quarters concerning profitability and operational efficiency metrics.

Tax Burden Ratio

The tax burden ratio shows fluctuations with some initial volatility. There is a noticeable peak around the end of 2019 and beginning of 2020 where the ratio reached above 1.0, followed by a stabilization period. In later quarters, the ratio generally stabilizes around 0.8 to 0.86, suggesting a normalized tax impact on earnings.

Interest Burden Ratio

The interest burden ratio demonstrates significant variability in earlier quarters, including a negative value observed around October 2020, indicating unusual financial charges or other accounting anomalies during that period. Following this, the ratio exhibits a consistent upward trend from 0.45 towards nearly 1.0 by the most recent quarter, suggesting a progressive reduction in interest expense relative to operating income, improving financial leverage.

EBIT Margin

The EBIT margin reveals a clear improving trend starting from a low single-digit percentage in early 2020 to a peak exceeding 30% in late 2023. This steady increase implies enhanced operational profitability and improved cost management. Despite some minor quarters of decline or plateau, the overall trajectory reflects growing efficiency and stronger earnings generation before interest and taxes.

Asset Turnover Ratio

Asset turnover shows mild variability but remains relatively stable throughout the period, fluctuating around 0.6 to 0.7. There is a slight downward trend observable in the most recent quarters, moving from 0.7 to 0.6. This indicates a marginal decline in revenue generation relative to asset base toward the end of the reporting timeline.

Return on Assets (ROA)

ROA follows an improving pattern, moving from near zero or negative values around late 2019 to a position well above 15% in recent quarters. This aligns with the upward trends in EBIT margin and shows effective overall profitability relative to total assets. The increasing ROA signifies more efficient asset utilization to generate earnings.

In summary, the data indicates meaningful improvement in key profitability measures such as EBIT margin and ROA over the analyzed period, supported by a marked reduction in interest burden. While asset turnover remains relatively consistent, it shows some decline in recent quarters, which may warrant further attention to asset efficiency. Stabilization of the tax burden ratio around mid to high 0.8 levels suggests consistent tax-related impacts on net profitability.

Tax Burden

The tax burden ratio exhibits some fluctuations initially, with values ranging from 0.77 to 1.47 in the early periods. From April 3, 2020, onward, the ratio stabilizes mostly between 0.8 and 0.9, indicating a relatively consistent tax effect on earnings in the later periods. This suggests a more predictable and steady tax impact on profitability after the early volatility.

Interest Burden

The interest burden ratio shows significant variation in the early periods, with a notably negative value of -0.18 on October 2, 2020, indicating an unusual or extraordinary influence on income before interest and taxes during that quarter. Following this, a clear upward trend is observed, increasing from 0.45 to 0.98 over subsequent periods. This trend points to improved control over interest expenses relative to earnings before interest and taxes, reflecting strengthening operational efficiency or reduced interest obligations over time.

EBIT Margin

The EBIT margin demonstrates a marked upward trend throughout the timeframe. Starting from a relatively low margin of 2.68% on October 2, 2020, it steadily climbs to a peak of 33.26% by December 31, 2023, before settling slightly lower at 31.76% in the most recent quarter. This substantial increase indicates ongoing improvements in operating profitability, possibly driven by better cost management, pricing power, or increased revenue quality.

Net Profit Margin

The net profit margin follows a parallel upward trajectory to the EBIT margin, beginning with a negative margin (-0.37%) on October 2, 2020, reflecting a period of net loss. The net margin then improves continuously, reaching a high of 26.69% by December 31, 2023, before a slight decrease to 26.67% in the latest period. This positive trend suggests enhanced overall profitability after taxes and interest, reflecting effective expense control and improved earnings generation from core operations.