Analog Devices Inc (ADI, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $176.78, Analog Devices Inc has witnessed a surge of 1.78% over a period, marked against a three-month change of 3.03%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Analog Devices Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is how Analog Devices Inc ranks in each of these components:
- 1. Financial strength rank: 7/10
- 2. Profitability rank: 9/10
- 3. Growth rank: 10/10
- 4. GF Value rank: 7/10
- 5. Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability, growth, and momentum, and decent ranks in financial strength and GF value, GuruFocus assigned Analog Devices Inc the GF Score of 96 out of 100, which signals the highest outperformance potential.
Understanding Analog Devices Inc's Business
Analog Devices Inc, with a market cap of $88.09 billion and sales of $12.84 billion, is a leading analog, mixed signal, and digital signal processing chipmaker. The firm has a significant market share lead in converter chips, which are used to translate analog signals to digital and vice versa. The company serves tens of thousands of customers, and more than half of its chip sales are made to industrial and automotive end markets. Analog Devices' chips are also incorporated into wireless infrastructure equipment. The company's operating margin stands impressively at 34.03%.
Financial Strength Breakdown
According to the Financial Strength rating, Analog Devices Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Analog Devices Inc stands impressively at 18.14, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.54, Analog Devices Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Analog Devices Inc's impressive standing among its peers in generating profit. Analog Devices Inc's strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Analog Devices Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 12.6%, which outperforms better than 51.33% of 865 companies in the Semiconductors industry. Moreover, Analog Devices Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 16.4, and the rate over the past five years is 10. This trend accentuates the company's continued capability to drive growth.
Conclusion
With its strong financial strength, impressive profitability, and robust growth metrics, Analog Devices Inc stands out as a promising investment opportunity. The GuruFocus Score Rating further highlights the firm's unparalleled position for potential outperformance. For investors seeking to explore more companies with strong GF Scores, GuruFocus Premium members can use the following screener link: GF Score Screen.
