The stock of semiconductor (SMH) company Analog Devices (ADI) has generated returns of 21% in the last 12 months. The stock, like the broader market, had a poor 2018, as it fell over 8%. Since the start of 2019, the stock is up 32%. Peers Micron (MU), Intel (INTC), and Western Digital (WDC) have gained 32%, 21%, and 42% this year, respectively.
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Analog Devices stock has generated returns of 92.5% in the last three years and is up 113% in the last five years. The company has managed to grow earnings at a CAGR of 25% in the last five years. The company’s sales had almost tripled from $2.6 billion in 2013 to $6.2 billion in 2018, and they are estimated to reach $6.80 billion by 2021.
ADI stock is currently trading 1.4% below its 52-week high of $114.59 and 47% above its 52-week low of $76.62. With an RSI (relative strength index) score of 62, ADI is trading close to overbought territory.
Is Analog Devices overvalued?
Analog is no longer a high growth company and thus should trade at a reasonable PE ratio. ADI has a forward 2019 PE ratio of 28.5x. For 2020, this ratio is 24.9x. Analysts expect ADI’s sales to be flat in 2019 and rise by 5.3% in 2020. Its EPS are expected to fall by 7.9% in 2019 and rise 9.7% in 2020.
Its EPS could grow at a CAGR of 9.3% over the next five years. The stock looks overvalued considering these metrics and accounting for a dividend yield of 1.7%.
Of the 26 analysts covering Analog Devices, 16 have given it “buy” recommendations, ten have given it “hold” recommendations, and none have given it “sell” recommendations. The average 12-month target price for ADI is $114.53, which indicates a potential upside of 1.4% from its current level.