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Analog Devices (ADI) Gains But Lags Market: What You Should Know

Zacks Equity Research

Analog Devices (ADI) closed at $116.76 in the latest trading session, marking a +0.02% move from the prior day. This move lagged the S&P 500's daily gain of 0.27%. Meanwhile, the Dow gained 1.31%, and the Nasdaq, a tech-heavy index, lost 0.39%.

Coming into today, shares of the semiconductor maker had lost 6.38% in the past month. In that same time, the Computer and Technology sector gained 6.66%, while the S&P 500 gained 6.66%.

ADI will be looking to display strength as it nears its next earnings release, which is expected to be August 19, 2020. On that day, ADI is projected to report earnings of $1.33 per share, which would represent year-over-year growth of 5.56%. Meanwhile, our latest consensus estimate is calling for revenue of $1.45 billion, down 1.98% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $4.65 per share and revenue of $5.49 billion. These totals would mark changes of -9.71% and -8.29%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for ADI. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 8.73% higher. ADI is currently a Zacks Rank #2 (Buy).

Digging into valuation, ADI currently has a Forward P/E ratio of 25.02. This valuation marks a discount compared to its industry's average Forward P/E of 36.89.

Also, we should mention that ADI has a PEG ratio of 1.88. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Semiconductor - Analog and Mixed stocks are, on average, holding a PEG ratio of 2.46 based on yesterday's closing prices.

The Semiconductor - Analog and Mixed industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 47, which puts it in the top 19% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow ADI in the coming trading sessions, be sure to utilize Zacks.com.

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