ADI - Embedded Expectations Analysis - 2021 09 27
Analog Devices, Inc. (ADI:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings with a 24.5x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about FCF margins, their capital allocation strategy, and finished goods inventory.Specifically, management may lack confidence in their ability to sustain FCF margin expansion, keep buybacks and dividends at current rates, and maintain adjusted EPS growth. In addition, they may be exaggerating the shareholder focus of their capital allocation strategy, the soundness of their debt position, and the capabilities of their new radio architecture. Furthermore, management may lack confidence in their ability to build finished good inventory, meet demand, and hit Q4 2021 gross and operating margin targets.
Analog Devices is an analog technology company. The company designs, manufactures, and markets a portfolio of solutions, including integrated circuits, algorithms, software, and subsystems. The company's analog products include data converter that translate real-world analog signals into digital data and also translate digital data into analog signals, amplifiers that condition analog signals, and power management and reference products that include functions such as power conversion, driver monitoring, sequencing and energy management. The company's digital signal processing products are designed to execute software programs, or algorithms, associated with processing digitized real-time, real-world data.
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