Has Advanced Energy’s 2025 Rally Pushed Its Valuation Beyond Future Cash Flow Potential?

• If you are wondering whether Advanced Energy Industries is still worth buying after its big run up, or if the smarter move now is to wait for a better entry point, you are not alone.
• The stock has cooled slightly over the last week, down 2.8%, but it is still up 6.3% over the last month, 86.5% year to date, and 78.8% over the past year. Longer term, its 3-year and 5-year returns are 153.9% and 124.0% respectively.
• Recent attention around Advanced Energy has focused on its position as a key supplier of precision power solutions for semiconductor and industrial applications. Investors increasingly view this space as mission critical for long term tech and AI infrastructure growth. At the same time, broader enthusiasm for equipment makers tied to chip capex has helped lift sentiment across the peer group, and Advanced Energy has been swept up in that renewed optimism.
• Despite those strong returns, Simply Wall St's valuation checks give Advanced Energy Industries a score of 0/6. In the sections ahead we will walk through what different valuation approaches are saying about the stock today, and then look at a more complete way to judge whether the current price really makes sense.

Advanced Energy Industries scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Advanced Energy Industries Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company is worth by projecting the cash it can generate in the future and discounting those cash flows back to today. For Advanced Energy Industries, Simply Wall St uses a 2 Stage Free Cash Flow to Equity approach, starting from the latest twelve month free cash flow of about $163.0 Million.

Analysts directly forecast free cash flow of $150.3 Million in 2026. Further out years are extrapolated based on gradually moderating declines followed by modest growth. By 2035, free cash flow is projected at around $163.6 Million, with each year discounted back to a present value in dollars using an appropriate required return.

Putting all of these discounted cash flows together gives an estimated intrinsic value of roughly $62.37 per share. Compared with the current share price, the DCF implies the stock is about 245.0% overvalued, suggesting investors are paying far above what the projected cash flows support.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Advanced Energy Industries may be overvalued by 245.0%. Discover 911 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Advanced Energy Industries.

Approach 2: Advanced Energy Industries Price vs Earnings

For a profitable business like Advanced Energy Industries, the price to earnings ratio is a natural way to judge valuation because it directly compares what investors pay with what the company actually earns. A higher or lower PE can be justified depending on how quickly earnings are expected to grow and how risky or cyclical those earnings are, so growth prospects and business stability both influence what a normal or fair PE should look like.

Advanced Energy currently trades on a PE of about 55.7x, which is well above the Electronic industry average of around 24.7x and also ahead of the peer group average of roughly 29.9x. On the surface, that suggests investors are paying a hefty premium for its earnings. However, Simply Wall St also calculates a Fair Ratio of about 38.2x. This is the PE you might expect given the company’s specific mix of earnings growth, profitability, industry, market cap and risk profile.

This Fair Ratio is more tailored than a simple comparison with peers or the sector because it adjusts for Advanced Energy’s own strengths and vulnerabilities rather than assuming all companies deserve the same multiple. Comparing that Fair Ratio of 38.2x with the current 55.7x suggests the shares are trading materially above what its fundamentals justify.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Advanced Energy Industries Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Advanced Energy Industries’ future with concrete numbers like revenue, earnings, margins and a fair value estimate.

A Narrative is your story about a company translated into a financial forecast, linking what you believe about its products, customers and industry to specific assumptions that then flow through to an estimated fair value per share.

On Simply Wall St, Narratives are easy to use and live inside the Community page, where millions of investors can outline their expectations, see how those expectations drive a valuation, and then compare their Fair Value to the current share price to decide whether it looks like a buy, hold or sell.

Because Narratives update dynamically when new information comes in, such as earnings results or news about data center and AI demand, your fair value view can evolve in real time rather than staying fixed on outdated assumptions.

For Advanced Energy Industries, one investor might build a bullish Narrative that assumes strong AI driven demand and lands near the higher fair value of about $225 per share. In contrast, a more cautious investor might emphasize cyclicality and customer concentration, arriving closer to the lower end around $120 and drawing very different buy or sell conclusions from the same stock price.

Do you think there's more to the story for Advanced Energy Industries? Head over to our Community to see what others are saying!

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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