ANALOG DEVICES INC (ADI): what the price requires
At today's price, ANALOG DEVICES INC (ADI) is priced for today's economics sustained for ~14.0 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ADI
Headline
| Field | Value |
|---|---|
| Ticker | ADI |
| Company | ANALOG DEVICES INC |
| Current price | $387.11/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 56.6% |
| Operating margin today | 31.5% |
| Margin expansion implied | +25.1pp |
| Must persist for | 14.0y |
| Multiple paid | 50x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 11.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.3 years.
Reconcile: at the x-ray's 9.3% required return this reads ~9.9 years; the models below use their own rates.
How unusual the bet is: high
| Reference | Value |
|---|---|
| vs own history | +0.37σ |
| cohort percentile (of 177 peers) | 79 |
| sustained it ~10 years at this level | 15% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 5.15x | 5 | expensive |
| Earnings | 4.75x | 5 | expensive |
| Relative | 1.65x | 5 | expensive |
| Growth | 0.80x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $484.22 | 0.80x | yes | FCF base $5.7B, growth 25% (input: historical growth), terminal g 4.0%, WACC 8.9%, 7yr projection |
| DCF Exit Multiple | Growth | $506.32 | 0.76x | yes | Exit EV/EBITDA: 43.1x / 46.1x / 49.1x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $234.64 | 1.65x | yes | P/E 32.59x (blended: static sector reference 22x + trailing (TTM) 57x), scenarios: 26.1x / 32.6x / 39.1x (bear / base = reference held flat / bull), EV/EBITDA 25.02x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $73.04 | 5.30x | yes | BV/sh $68.80, ROE (TTM) 9.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $75.20 | 5.15x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $477.16 | 0.81x | yes | Rev $12.7B, growth 30% (input: historical growth; tapered), Terminal P/S: 9.6x / 12.0x / 14.4x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $235.55 | 1.64x | yes | EPS $6.73, growth 35% (input: historical EPS growth), PEG=1.64 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $56.24 | 6.88x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $3.17B × (1−11%) / WACC 8.9% → EPV (no growth) |
| Residual Income | Asset | $75.58 | 5.12x | yes | BV $68.80 + 5yr PV of (ROE (TTM) 9.8% − Kₑ 9.3%) × BV; BV grows 6.4%/yr |
| Graham Number | Asset | $102.07 | 3.79x | yes | √(22.5 × EPS $6.73 × BVPS $68.80) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $126.89 | 3.05x | yes | EBITDA $4.25B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $89.01 | 4.35x | yes | FCF $4565.1M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $81.55 | 4.75x | yes | SBC-adj FCF $4.23B (FCF $4.57B − SBC $0.34B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $217.15 | 1.78x | yes | EPS $6.73 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $23.99 | 16.14x | yes | BV $68.80 × (ROIC 3.1% / WACC 8.9%) |
| P/Sales Sector | Relative | $129.88 | 2.98x | yes | Revenue $12.74B × sector P/S 5.0x |
| PEG Fair Value | Relative | $252.37 | 1.53x | yes | EPS $6.73 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $72.76 | 5.32x | yes | EPS $6.73 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $5.1b |
| Net debt / NOPAT (after-tax) | 1.48x |
| Net debt / operating income (pre-tax) | 1.32x |
| Interest coverage | 11.8x |
| Share count CAGR (buyback) | -1.7% |
| Burning cash | no |
Bullet Takeaways
- Analog Devices makes high-performance analog and mixed-signal chips with unusually long product lives, sold mostly into industrial, automotive, and communications customers, which gives it a stickier, less commoditized franchise than digital-logic chipmakers.
- The business is coming off a cyclical trough and back into recovery, with recent record quarterly revenue driven by industrial, data-center, and automotive demand, so the trailing margin understates the through-cycle earnings power.
- The defining risk is the price: the stock trades at a multiple sitting at the very top of the semiconductor peer group, so the bet is that this recovery is strong and durable rather than the usual cyclical bounce, with the dividend and steady buyback as the cushion.
Bull Case
Watch where the cash goes and the quality of this franchise becomes clear. Analog Devices throws off roughly $4.6 billion of free cash flow, pays a growing dividend, and steadily retires stock, the share count has drifted down about 1.7% a year, while still funding research and bolt-on acquisitions like the Empower deal aimed at AI power delivery. A company that can return cash, invest in the next product cycle, and shrink its share count at the same time is signaling that its core economics are durable, not fragile. That durability is the heart of the bull case.
The source of it is the nature of analog. Unlike digital logic, which races down a process curve and commoditizes, Analog Devices' chips "typically have long product life cycles," and the company sells into "the business-to-business end markets of Industrial, Automotive and Communications." Once an analog part is designed into an industrial controller or a car, it tends to stay there for years, because requalifying a new supplier is expensive and risky for the customer. That design-in stickiness produces high gross margins and pricing power that survive downturns, and it is why the company describes itself as solving customers' "most complex engineering challenges" rather than competing on cost. The franchise is a collection of thousands of these embedded, hard-to-displace positions.
The cycle is turning the right way at the right time. After a demand correction, the recovery is broad: recent results showed record quarterly revenue with strength across industrial, data center, and automotive, and the industrial segment in particular reaccelerating on automation, energy transition, AI test equipment, and robotics. Those are precisely the secular drivers that should lift the through-cycle baseline, not just the cyclical peak. The balance sheet supports the run, net debt of about $5.1 billion is only a little over one year of operating income, with interest covered roughly twelve times. The bull case is a high-quality, sticky analog franchise emerging from a trough into structurally growing end markets, returning cash the whole way.
Bear Case
The bear case is the oldest one in semiconductors: this is a cyclical business, and the price is paying a peak multiple on earnings that are only just recovering. Analog demand swings with the capital and consumer cycles, and the company's chips run through distributors and OEMs whose orders amplify the swing, building inventory in good times and draining it in bad. Analog Devices itself flags that demand depends on "consumer spending, consumer preferences, the development of new technologies and macroeconomic conditions, including impacts related to tariffs and other trade restrictions," and warns of the danger if it "overbuild[s] inventory." A recovery that looks broad today can stall if industrial or automotive customers digest the chips they have already ordered, and the bookings turn before the revenue does.
The trouble is what the price assumes about that cycle. At today's level the market is paying about 56 times company-wide operating income, a multiple the data places at the very top of the semiconductor peer distribution, well beyond the upper quartile, and which implies operating profit compounding near its self-funding ceiling for roughly 16 years. Only about 15% of comparable fast-growers sustained that kind of pace for even a decade. The reason the multiple looks so extreme is that it is measured against a recovering-but-still-depressed denominator, the trailing operating margin near 32.5%, with reported returns on equity weighed down by amortization from the Maxim and Linear acquisitions, so a buyer is paying a top-of-group multiple on trough-ish earnings and trusting the through-cycle number to be far higher.
The valuation methods confirm how much is riding on growth. The asset, earnings-power, and peer-multiple lenses all sit well below the price, and only the forward-growth method reaches it. The balance sheet is sound and removes survival risk, but a sound balance sheet does not justify a peak multiple if the recovery proves ordinary. The bear does not need a downturn, only for the cycle to be a normal cyclical bounce rather than a permanent step-up in earnings power. If industrial and automotive demand merely normalizes rather than compounds for a decade and a half, the top-of-group multiple has the furthest to fall, and a high-quality company can still be a poor investment bought at the wrong point in its cycle.
Valuation
The number that frames everything is the multiple, and it is extreme. At $434.10 (as of June 27, 2026) the market is paying about 56 times company-wide operating income, which inverts to operating profit compounding near its self-funding ceiling for roughly 16 years, a pace only about 15% of comparable fast-growers sustained for even ten. The data places that multiple at the very top of the semiconductor peer distribution, well beyond the upper quartile. The reason it reads so stretched is the cyclical denominator: Analog Devices is emerging from a demand trough, its trailing operating margin near 32.5% is below the level it earns at the top of the cycle, and reported returns are depressed by acquisition amortization, so the trailing operating income the multiple divides into is understated and the multiple it produces is overstated.
That cyclical distortion is why the families of methods split so sharply. The asset-value methods anchor on a book value near $68.80 a share, inflated by acquisition goodwill, and land far below the price. The earnings-power method, capitalizing normalized operating income with no growth, sits well under it, and even the peer-multiple lens calls the stock dear. The single family that reaches the price is the forward-growth lens, which credits a strong, durable recovery. So the static methods uniformly say richly valued, and only growth justifies the price, the signature of a stock priced for the upswing to be both strong and lasting. The honest way to value a name like this is on mid-cycle or peak earnings power rather than the trailing trough, but even on a generous normalized basis a top-of-peer multiple leaves little room.
Solvency is sound and bounds the downside cleanly. Net debt of about $5.1 billion is only a little over one year of operating income, interest is covered roughly twelve times, the company is not burning cash, and it both pays a dividend and buys back stock. There is no financial fragility to bound against, so the downside is governed by the cycle and the multiple, not by the balance sheet. The decisive question for the price is not whether Analog Devices can weather a downturn, it plainly can, but whether the current recovery is a durable step-up in earnings power or a cyclical bounce being capitalized at a peak multiple.
Catalysts
The recovery is the live catalyst, and the most recent print confirmed it. Second-quarter fiscal 2026 revenue of $3.62 billion beat the roughly $3.50 billion expected, and EPS of $3.09 beat the roughly $2.92 estimate, with management citing record quarterly revenue and EPS driven by strength in industrial, data center, and automotive. The industrial segment, the company's largest and highest-margin end market, has been reaccelerating sharply on automation, AI test equipment, energy transition, and robotics, and guidance points to continued above-seasonal growth.
The capital-deployment catalyst is the Empower acquisition, aimed at expanding Analog Devices' position in AI power delivery, a fast-growing adjacency tied to data-center buildout. Bolt-on deals like this are how ADI extends its analog franchise into the next demand wave without betting the balance sheet.
Sentiment is constructive and broadly aligned with the price. The covering analysts lean Buy, with a mean target close to the current level, around $451, and several firms, including Jefferies, Goldman Sachs, and Stifel, raising targets after the Q2 beat while maintaining Buy ratings. With the price and the average target close together, the market is largely pricing in the recovery already, so the catalysts that move the stock from here are evidence the upcycle is broadening and durable, and the risk is any sign that industrial or automotive bookings are rolling over as customers digest inventory.
Peer Cohorts (Per Segment, With Filing Citations)
Analog Devices (consolidated) (reported)
- TXN (TEXAS INSTRUMENTS INCORPORATED)
- (no filing in the citation store)
- NXPI (NXP Semiconductors N.V.)
- (no filing in the citation store)
- QRVO (Qorvo, Inc.)
- (no filing in the citation store)
- MPWR (MONOLITHIC POWER SYSTEMS INC)
- (no filing in the citation store)
- MCHP (MICROCHIP TECHNOLOGY INCORPORATED)
- (no filing in the citation store)
- ON (ON Semiconductor Corporation)
- (no filing in the citation store)
- STM (STMicroelectronics N.V.)
- (no filing in the citation store)
- SWKS (SKYWORKS SOLUTIONS, INC.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
ADI Q2 FY2026 results · company commentary, FY2026 · company announcement, 2026 · analyst actions, 2026