A Look at Allegro MicroSystems (ALGM) Valuation Following Launch of Breakthrough 10 MHz Power Sensor

Allegro MicroSystems (ALGM) is in the spotlight after launching a magnetic current sensor featuring 10 MHz bandwidth, powered by its proprietary XtremeSense TMR technology. This release is making waves across electric vehicle, clean energy, and AI data center markets.

See our latest analysis for Allegro MicroSystems.

Following the sensor announcement and a high-profile executive appointment, momentum has clearly picked up for Allegro MicroSystems. The stock’s total shareholder return over the past year stands at an impressive 43.6%, while the share price has climbed 35.9% year-to-date. This suggests that recent innovations are fueling both investor confidence and fresh upside potential.

If Allegro’s surge has you curious, why not check out other growth stories in the tech and AI space? See the full list for free: See the full list for free.

But with shares up sharply this year, investors are now debating whether Allegro MicroSystems is trading at a discount to its true value or if the market has already priced in the company's growth prospects. The question is whether there is still a compelling buying opportunity, or if future upside has been fully reflected in today’s price.

Most Popular Narrative: 16.4% Undervalued

Allegro MicroSystems is trading at $30.99, with the most widely followed narrative fair value estimate at $37.08. The numbers suggest a significant gap that could indicate opportunity, especially given the current sentiment around the company's future trajectory.

Ongoing investments and recent improvements in proprietary manufacturing and test yield (notably in TMR sensor ICs) are translating to cost reductions and enhanced gross margins. This trend is expected to continue as product differentiation and scale improve, which could positively impact net margins.

Read the complete narrative.

What happens when ambitious manufacturing targets collide with bold profitability forecasts? The narrative relies on a series of bullish growth assumptions, including a dramatic earnings turnaround and an aggressive shift in margins. Curious what financial leaps and industry bets drive this surprisingly high fair value? The underlying model is built around numbers you won’t want to miss.

Result: Fair Value of $37.08 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensifying competition in China and Allegro’s reliance on automotive markets could limit growth and present challenges to the positive outlook for future earnings.

Find out about the key risks to this Allegro MicroSystems narrative.

Another View: Expensive by Sales Ratio

Looking from a different angle, Allegro MicroSystems trades at a price-to-sales ratio of 7.5x, which is meaningfully higher than both its peer average of 5.5x and the US Semiconductor industry average of 5.1x. Even compared to the market’s fair ratio of 4.8x, Allegro looks expensive. This raises the question: are investors at risk if market sentiment cools down?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Allegro MicroSystems Narrative

If you want to see the numbers through your own lens or prefer hands-on analysis, shaping your own narrative is quick and easy. Do it your way.

A great starting point for your Allegro MicroSystems research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for More Investment Ideas?

Take charge of your next investment and uncover smart opportunities before the crowd catches on. Simply Wall Street’s Screener brings you tailored picks with just a few clicks, helping you spot gems you might otherwise miss.

• Secure steady potential and reliable income when you tap into these 17 dividend stocks with yields > 3% offering attractive yields above 3%.
• Catch the momentum early with these 27 AI penny stocks, a collection focused on companies driving breakthroughs in artificial intelligence and automation.
• Capitalize on tomorrow’s technology as you check out these 27 quantum computing stocks, featuring top innovators accelerating the quantum computing revolution.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com