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Onto Innovation Inc. (ONTO) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Onto Innovation Inc. (ONTO)

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Intrinsic Value (DCF)

Current$217.85
→
Intrinsic$156.11
-28%
$107.56$156.11$248.23
Market implies 35% growth for 5 years
ONTO trades at a premium to our conservative estimate — investors expect above-average performance.
At $218, the market prices in continued strong cash flow growth (35%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $108 → Bull $248. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →21%23%25%27%
8%$191$206$222$239
10%$135$145$156$168
12%$104$111$120$128
14%$84$90$96$103

Bull Case

  • Bull case ($248) offers 14% upside at 30% growth, 9% discount

Bear Case

  • Bear case ($108) implies 51% downside at 20% growth, 12% discount
  • Price reflects 35% growth expectations vs 25% historical — high bar to clear
  • Trading 28% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$267.22M
Year 2$334.02M
Year 3$417.53M
Year 4$521.91M
Year 5$652.38M
Terminal$9.60B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$213.77MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is ONTO stock undervalued or overvalued?
🔴 OVERVALUED

ONTO trades at $217.85 vs. our DCF-derived intrinsic value of $130.00, implying -31% downside. Using a 10.0% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($193.86) suggests limited upside.

What is ONTO's intrinsic value?

Using a 5-year DCF model: Base FCF of $214M, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-198M net debt and dividing by 0.05B shares: Bear $86.64 | Base $130.00 | Bull $193.86. Current price $217.85 implies -31% to base case.

How is ONTO's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($6.26B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.