Allegro MicroSystems (ALGM): Evaluating Valuation After Strong Earnings, Upbeat Guidance, and Product Innovation

Allegro MicroSystems (ALGM) captured attention after releasing quarterly results that showed a return to profitability, 14% year-over-year revenue growth, and fresh guidance that topped what most on Wall Street were expecting.

See our latest analysis for Allegro MicroSystems.

Allegro’s shares have captured fresh momentum this year, driven by strong e-Mobility and industrial demand, product launches, and solid earnings outperformance. With a year-to-date share price return of 31% and a robust 41.8% total shareholder return over 12 months, both short-term and long-term performance signal growing optimism about its growth runway and operational discipline.

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With shares climbing after a string of earnings beats and upbeat guidance, the key question for investors now is clear: Is Allegro MicroSystems trading below its fair value, or is future growth already fully priced in?

Most Popular Narrative: 18.6% Undervalued

According to the most widely followed narrative, Allegro MicroSystems appears attractively priced compared to its fair value estimate of $36.75, with shares last closing at $29.92. This perspective sets up a debate on the pace and durability of its earnings surge.

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 is expected to continue as product differentiation and scale improve, which would positively impact net margins.

Read the complete narrative.

Want to know why the math points higher? This valuation relies on Allegro’s ability to supercharge profits and margins far beyond today’s baseline. The secret ingredients include bold revenue bets, significant margin assumptions, and a future multiple that rivals industry titans. Discover what is fueling the fair value calculation in the full narrative.

Result: Fair Value of $36.75 (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 demand could create challenges for the company’s growth assumptions and may put pressure on future margins.

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

Another View: Market Ratios Raise a Red Flag

Looking at Allegro MicroSystems through the lens of its sales ratio reveals a different picture. The company's ratio sits at 7x, noticeably higher than the US Semiconductor industry average of 5.3x and its peer average of 12.3x. While this premium could highlight optimism about growth, it also introduces valuation risk if future performance disappoints. Is the current price justified, or might the market eventually expect this ratio to shift closer to the fair ratio of 5.2x?

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

Build Your Own Allegro MicroSystems Narrative

If these views don't fit your take or you like to crunch numbers personally, dive into the data and develop your own perspective with just a few clicks. Do it your way

A great starting point for your Allegro MicroSystems research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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