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Analog Devices (ADI) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 min read

Analog Devices (ADI) closed at $135.82 in the latest trading session, marking a +1.74% move from the prior day. This move outpaced the S&P 500's daily gain of 1.17%. At the same time, the Dow added 2.95%, and the tech-heavy Nasdaq lost 1.53%.

Heading into today, shares of the semiconductor maker had gained 10.94% over the past month, outpacing the Computer and Technology sector's gain of 8.29% and the S&P 500's gain of 4.58% in that time.

ADI will be looking to display strength as it nears its next earnings release, which is expected to be November 24, 2020. On that day, ADI is projected to report earnings of $1.32 per share, which would represent year-over-year growth of 10.92%. Meanwhile, our latest consensus estimate is calling for revenue of $1.44 billion, up 0.01% from the prior-year quarter.

Investors might also notice recent changes to analyst estimates for ADI. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. ADI is currently sporting a Zacks Rank of #4 (Sell).

In terms of valuation, ADI is currently trading at a Forward P/E ratio of 23.68. For comparison, its industry has an average Forward P/E of 32.12, which means ADI is trading at a discount to the group.

It is also worth noting that ADI currently has a PEG ratio of 2.37. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. ADI's industry had an average PEG ratio of 2.53 as of yesterday's close.

The Semiconductor - Analog and Mixed industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 76, which puts it in the top 30% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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