When Should You Buy Analog Devices, Inc. (NASDAQ:ADI)?

Let's talk about the popular Analog Devices, Inc. (NASDAQ:ADI). The company's shares received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Analog Devices’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Analog Devices

What's The Opportunity In Analog Devices?

According to our valuation model, Analog Devices seems to be fairly priced at around 2.8% below our intrinsic value, which means if you buy Analog Devices today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $200.34, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Analog Devices’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Analog Devices generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 4.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Analog Devices, at least in the short term.

What This Means For You

Are you a shareholder? ADI’s 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 tabs on ADI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for Analog Devices you should be aware of.

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.