What Is Analog Devices, Inc.'s (NASDAQ:ADI) Share Price Doing?

Today we're going to take a look at the well-established Analog Devices, Inc. (NASDAQ:ADI). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$200 at one point, and dropping to the lows of US$171. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Analog Devices' current trading price of US$173 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Analog Devices’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Analog Devices

What's The Opportunity In Analog Devices?

According to my valuation model, Analog Devices seems to be fairly priced at around 6.50% above my intrinsic value, which means if you buy Analog Devices today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $162.08, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Analog Devices’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Analog Devices?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Analog Devices' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ADI’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on ADI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Analog Devices at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Analog Devices.

If you are no longer interested in Analog Devices, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.