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Xilinx’s Stock Rally Makes It Fundamentally Expensive


Nov. 20 2020, Updated 4:48 p.m. ET

Wall Street analysts on Xilinx

Xilinx’s (XLNX) stock is currently trading near its all-time high, and technical indicators and the stock’s fundamentals show no signs of a slowdown, which poses the question of whether it is wise to buy the stock at its current price. Wall Street analysts have mixed recommendations with 12 out of 25 analysts monitoring the stock having “buy” recommendations and 11 having a “hold” recommendation. Analysts’ median stock price target of $110 represents a 12.5% downside from the current trading price.

While analysts are mixed on Xilinx, let’s look at whether Xilinx is a “buy” by looking at its price ratios, which value a stock by analyzing the stock price against its fundamentals.

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Price-to-sales ratio

A company’s PS (price-to-sales) ratio tells us the amount investors are willing to pay for every dollar of the company’s sales. As of March 25, Xilinx’s PS ratio of 10.8x is higher than the PS ratios of its peers Intel (INTC), Advanced Micro Devices (AMD), and NVIDIA (NVDA).

Xilinx’s PS ratio is high, as its sales are expected to rise 21% YoY in fiscal 2019. However, AMD and NVDA also reported more than 20% YoY growth in 2018, indicating that Xilinx is expensive compared to AMD and NVIDIA for the same level of sales growth.

Price-to-earnings ratio

A company’s PE ratio tells us the amount investors are willing to pay per dollar of EPS. As of March 25, Xilinx’s PE ratio of 36.9x is higher than that of Intel and NVIDIA but lower than that of AMD.

Xilinx’s PE ratio of 36.9x shows that it’s a relatively expensive stock for 72% YoY EPS growth expectations for fiscal 2019, whereas INTC and NVDA reported over 30% YoY EPS growth for a PE ratio of 12.0x and 28.8x, respectively.

PEG ratio

A high growth company generally has a high PE ratio, which makes it look overvalued in front of more mature companies. To normalize the effect of high growth, PE ratio is divided by the company’s expected earnings growth rate for the next year. The resultant ratio is called the PEG (price/earnings to growth) ratio. Xilinx’s PEG ratio of is 2.0x, which is lower than the industry average of 2.99x and lower than that of XLNX, NVDA, and AMD, indicating that XLNX’s stock has already priced in future growth.

Check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look!


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