We recently published a list of 10 Best Mid Cap Tech Stocks to Buy Now. In this article, we are going to take a look at where Onto Innovation Inc. (NASDAQ:ONTO) stands against other best mid cap tech stocks to buy now.
In an interview with CNBC, Thomas Martin, the Senior Portfolio Manager at GLOBALT Investments, highlighted that tech earnings are slowing and policy risks are rising. However, he remains positive on tech stocks as underlying fundamentals are strong. But he emphasized that diversification is key. He pointed out that while big tech hasn’t lost its luster yet, maybe it is time to look elsewhere.
Most investors focus on the big tech names like the Mag 7. As a result, there is a smaller probability of a mismatch between their valuation and their intrinsic value. The smaller tech names are usually overlooked. Hence, some of these stocks could offer deep value. Some US mid-cap stocks are deeply undervalued.
According to JP Morgan, US large-cap stocks have returned 12.6% annually over the past 10 years. Meanwhile, the same set of stocks have seen an EPS (earnings per share) growth of only 6.9% on an annualized basis, according to JP Morgan.
On the other hand, US mid-cap stocks have returned 9.3% annually over the past 10 years, with an EPS growth of 9.9% annually over the last 10 years. The large-cap stocks have seen superior returns despite lower earnings growth compared to mid-cap stocks in the same period. This underscores the value proposition of mid-cap tech stocks.
In the CNBC interview, Thomas Martin acknowledged that the Trump administration’s policies might have some effect on inflation and interest rates. However, according to Martin, those effects might be muted. That said, interest rates remain high, and smaller companies usually underperform during high interest rate regimes.
According to a quarterly report released by Pathstone in January 2025, smaller companies are facing several risks, including policy uncertainty and rising Treasury yields. As a result, while mid-cap tech stocks have potential, they need to be chosen carefully.
Mid-cap tech companies with strong balance sheets and decent profitability are better equipped to navigate through the high-interest rate period compared to those that are highly leveraged and have low profitability.
Our Methodology
We have curated a list of 10 mid-cap companies after considering the risks involved in investing in mid-cap companies. We used Finviz to include only companies with a market cap of $2 billion up to $10 billion, as we are looking for mid-cap stocks. As for the sector, we chose technology.
To weed out unwanted, low-quality mid-cap stocks, we chose only companies with decent profitability. So, we weeded out the companies with an operating margin of less than 10%. Since we want companies with a solid balance sheet, we set the long-term debt-to-equity ratio at under 0.5. We also chose companies with an average analyst upside of at least 10%. The stocks are sorted in ascending order of their upside potential. Additionally, we have mentioned the hedge fund sentiment for each stock, as of Q4 2024.
Note: All data was recorded on March 10, 2025.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Onto Innovation Inc. (ONTO) the Best Mid Cap Tech Stock to Buy Now?
A technician observing a macro defect inspection process, the precision of the company's systems.
Onto Innovation Inc. (NASDAQ:ONTO) makes money by selling advanced tools and software to companies that make semiconductors. The company makes machines that help semiconductor companies test, design, and improve their semiconductors. Onto Innovation Inc. (NASDAQ:ONTO) also provides software that helps clients improve their production processes and make sense of data. Additionally, it provides continuous maintenance and updates for the machines and software it sells.
The company’s revenue has grown at a pace of over 15% annually over the last five years. The company is also highly profitable. During the same period, the company’s net margin expanded from 5.6% to 20.4%. The company expects margins to expand further.
The company’s key growth drivers for the previous fiscal year included AI packaging, advanced packaging, and power devices. It saw significant demand for inspection tools, especially in 2.5D Logic (a packaging methodology for semiconductors) and HBM (high bandwidth memory) processes. Both areas are seeing increased demand as semiconductor needs for AI are burgeoning. Onto Innovation Inc. (NASDAQ:ONTO) is also likely to benefit from TSMC’s planned increase in CapEx for advanced packaging. The company expects increased demand for process control equipment as customers ramp up capacity for advanced packaging.
Overall, ONTO ranks 1st on our list of best mid cap tech stocks to buy now. While we acknowledge the growth potential of ONTO, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ONTO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
