ALLEGRO MICROSYSTEMS, INC. (ALGM): what the price requires
At today's price, ALLEGRO MICROSYSTEMS, INC. (ALGM) is priced for today's economics sustained for ~29.2 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: 2026-07-19 · Source: https://boothcheck.com/report/ALGM
Headline
| Field | Value |
|---|---|
| Ticker | ALGM |
| Company | ALLEGRO MICROSYSTEMS, INC. |
| Current price | $50.77/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 (mid-cycle) | 8.1% |
| Trailing margin (depressed year) | 1.6% |
| Must persist for | 29.2y |
| Multiple paid | 140x mid-cycle operating income |
Solve inputs: computed at a 13.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~3.7 years.
Reconcile: at the x-ray's 9.3% required return this reads ~17.5 years; the models below use their own rates.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| vs own history | -0.28σ |
| 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 | 10.45x | 2 | expensive |
| Earnings | 12.66x | 3 | expensive |
| Relative | 2.12x | 3 | expensive |
| Growth | 1.15x | 4 | expensive |
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 9.0%); the inversion above states its own rate.
Per-Model Detail (n=12)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $26.42 | 1.92x | yes | FCF base $0.1B, growth 23% (input: historical growth), terminal g 4.0%, WACC 9.0%, 7yr projection |
| DCF Exit Multiple | Growth | $56.06 | 0.91x | yes | Exit EV/EBITDA: 109.4x / 111.4x / 113.4x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $23.90 | 2.12x | yes | P/S fallback (negative EPS): Sector P/S 5.0x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $5.13 | 9.90x | yes | Book value floor: BV/sh $5.13, ROE negative |
| Two-Stage Excess Return | Asset | $4.61 | 11.01x | yes | Book value with convergence: BV/sh $5.13, ROE converges to ke |
| Discounted Future Market Cap | Growth | $61.43 | 0.83x | yes | Rev $0.9B, growth 23% (input: historical growth; tapered), Terminal P/S: 8.6x / 10.6x / 12.6x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | $36.35 | 1.40x | yes | Margin ramp: -2% → 25% over 7yr, rev growth 23% (input: historical growth; tapered) |
| Earnings Power Value | Earnings | $4.01 | 12.66x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.10B × (1−21%) / WACC 9.0% → EPV (no growth) |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $6.66 | 7.62x | yes | EBITDA $0.09B × sector EV/EBITDA 16.0x |
| FCF Yield | Earnings | $6.51 | 7.80x | yes | FCF $124.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $3.73 | 13.61x | yes | SBC-adj FCF $0.08B (FCF $0.12B − SBC $0.05B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | $0.22 | 230.75x | yes | BV $5.13 × (ROIC 0.4% / WACC 9.0%) (excluded from median) |
| P/Sales Sector | Relative | $23.90 | 2.12x | yes | Revenue $0.89B × sector P/S 5.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $124.9m |
| Net debt / NOPAT (after-tax) | 2.32x |
| Net debt / operating income (pre-tax) | 1.83x |
| Interest coverage | 2.8x |
| Share count CAGR (buyback) | -0.8% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 8.1%); the trailing year was depressed.
Bullet Takeaways
The balance sheet carried Allegro through the chip downturn: net debt is modest at about $125 million, under two times mid-cycle operating income, with interest coverage near 3.3 times.
The business is recovering hard. Fiscal 2026 revenue rose 23 percent to $890 million, a fifth straight quarter of sequential growth, led by automotive e-Mobility and a record data-center quarter in industrial.
The structural problem is the price. Trailing earnings are cycle-depressed, so the price reads against mid-cycle margins, and even there the market is paying about 163 times normalized operating income, a level no standard valuation frame supports.
Bull Case
The balance sheet is the foundation that lets the recovery story play out, and it held up through a brutal stretch. Allegro carries net debt of only about $125 million, under two times its mid-cycle operating income, with interest coverage near 3.3 times even on cycle-depressed earnings and liquid assets that exceed the net debt. For a semiconductor company that just lived through an automotive and industrial inventory correction, surviving the trough without balance-sheet stress is the precondition for everything else. The company did not have to issue equity at depressed prices or cut its way into a weaker position; it kept investing in design and capacity while the cycle bottomed.
That patience is now paying off as the business inflects. Fiscal 2026 revenue rose 23 percent to $890 million, the fifth consecutive quarter of sequential growth, finishing at $243 million in the fourth quarter. The growth is broad and aimed at the right end markets: automotive sales grew 28 percent year over year in a recent quarter, including a 46 percent jump in e-Mobility, while industrial grew 31 percent led by a record data-center quarter. Magnetic-sensor revenue, the core franchise, reached $141 million in the fourth quarter, up 21 percent year over year. The filing describes the strategy of using an "established position in high-value automotive and industrial applications to increase our content per system" (FY2025 10-K, accession 0000950170-25-076059), and rising electric-vehicle and ADAS content is exactly the secular driver behind the e-Mobility surge.
The forward setup reinforces the recovery. Fiscal 2026 design wins rose more than 30 percent year over year, the total backlog sits at a multiyear high, and management guides to automotive growth of 7 to 10 percent above the underlying car-production rate with continued margin expansion in fiscal 2027. Current-sensor chips that "improve energy efficiency" across "on-board chargers, DC-DC converters" and similar applications (same filing) ride the same electrification wave. A company that defended its balance sheet through the downturn and is now compounding revenue with a record backlog and rising design wins has the financial flexibility and the secular tailwind to keep growing as the cycle recovers.
Bear Case
The structural truth a holder would rather not face is the valuation, and it is stark. Even reading the price against mid-cycle rather than trough margins, to give the cyclical business the benefit of the doubt, the market is paying about 163 times normalized operating income. No valuation family reaches the price: it is rich on assets, earnings power, peers, and even forward growth, with a blended central value near $25 against the $58.96 (June 27, 2026) quote. Inverting the price embeds operating growth held near the self-funding ceiling for roughly three decades, a duration only about 15 percent of comparable fast-growers approached even over ten years. The recovery is real, but the price is not paying for a recovery; it is paying for a near-permanent best case.
The second hard truth is that this is a deeply cyclical business dressed in a growth multiple. Automotive and industrial chip demand swings with vehicle production and capital spending, and Allegro just came through a downturn that pushed its trailing operating margin to about 2 percent. The fifth straight quarter of growth is encouraging, but extrapolating the recovery quarter into the steady state is how cyclicals get overpriced. The very volatility that produced the depressed trailing earnings can return, and at 163 times mid-cycle income there is no margin for a slowdown.
Customer and channel concentration sharpen the risk. The filing discloses a long-standing relationship with Sanken in Japan that "represented approximately 16.5 percent of our net sales" in a recent year, and that the largest non-affiliated distributor accounted for roughly 10 percent of sales (FY2025 10-K, accession 0000950170-25-076059). A few large relationships and distributors drive a meaningful share of revenue, so a single customer's inventory adjustment or program change can move results. The e-Mobility growth the bulls emphasize is also tied to electric-vehicle adoption rates, which have proven uneven. A cyclical, concentration-exposed sensor maker priced beyond every standard frame is carrying a valuation that assumes the cycle never turns down again, which it always does.
Valuation
Trailing earnings are depressed by the cycle, with a trailing operating margin near 2 percent, so the price is read against the company's own through-the-cycle margins, near 8.1 percent mid-cycle, rather than the trough quarter. Even on that more generous basis, the market is paying about 163 times normalized operating income, and no valuation family reaches the price: it is rich on assets, earnings power, peers, and even forward growth. The blended central value across methods sits near $25 against the $58.96 price, a gap of more than two to one.
Inverting the price implies operating growth held near the self-funding ceiling for roughly 32 years, far beyond any reasonable base rate, since only about 15 percent of comparable fast-growers sustained their pace even ten years. The fundamentals are genuinely improving, with fiscal 2026 revenue up 23 percent, a record backlog, and design wins up more than 30 percent, but the valuation is not pricing a normal recovery; it is pricing a multi-decade continuation of ceiling-level growth at margins the company has not yet rebuilt. The balance sheet is sound, with net debt under two times mid-cycle operating income, so leverage is not the risk; the risk is entirely in the multiple. The investment case is therefore a bet that the electrification-driven content growth in automotive and industrial is durable enough, and the margin recovery strong enough, to grow into a price that the static methods value at a fraction of today's level. The upside requires the secular tailwind and the cyclical recovery to compound together for years; the downside is that any return of the chip cycle, or a stall in electric-vehicle demand, collapses the gap toward the static methods.
Catalysts
The automotive and e-Mobility recovery is the central catalyst. Automotive sales grew 28 percent year over year in a recent quarter with e-Mobility up 46 percent, and management guides to automotive growth of 7 to 10 percent above the underlying car-production rate. The pace of that above-market growth, and whether the fifth straight quarter of sequential gains extends, is the key signal that the recovery is durable rather than a restocking bounce.
Backlog and design wins are the forward catalysts. Fiscal 2026 design wins rose more than 30 percent year over year and the total backlog sits at a multiyear high, with a fiscal 2027 outlook for continued above-market growth and margin expansion. Watch backlog conversion and the margin trajectory, since the valuation depends on the company rebuilding its mid-cycle margin while it grows. Industrial strength, including a record data-center quarter, is a second growth vector to track.
The chip cycle and customer concentration are the swing factors. Automotive and industrial semiconductor demand is cyclical, so vehicle-production trends, electric-vehicle adoption rates, and distributor inventory levels are the external catalysts in either direction. Concentration in a few large customers and distributors means a single inventory adjustment can move results. Quarterly results and margin progress remain the main proof points on whether the recovery and the secular content growth are holding.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- MPWR (MONOLITHIC POWER SYSTEMS INC)
- FY2025 10-K: …partners utilize prior to shipping to our customers. The manufacturing facilities we utilize in Asia enable us to benefit from shorter manufacturing cycle times and lower labor and overhead costs. We have expanded our product testing capabilities in these facilities and are able to take advantage of the rich pool of…
- FY2025 10-K: …of such products. We consider our primary competitors to include Analog Devices, Infineon Technologies, NXP Semiconductors, ON Semiconductor, Power Integrations, Renesas Electronics, ROHM Semiconductor, Semtech, STMicroelectronics and Texas Instruments. 9 Table of Contents We expect continued competition from…
- POWI (POWER INTEGRATIONS, INC.)
- FY2025 10-K: …with alternatives from such companies as Infineon, Mitsubishi Electric, Fuji Electric, Semikron and Hangzhou Firstack Technology Co., as well as driver circuits made up of discrete devices. Our motor-driver ICs compete with power modules from such companies as ON Semiconductor, Infineon, STMicroelectronics,…
- FY2025 10-K: …is subject to change based on the relative pricing of solutions that compete with ours. Variations in product mix, end-market mix and customer mix can also cause our gross margin to fluctuate. Also, because we purchase a large percentage of our silicon wafers from foundries located in Japan, our gross margin is…
- MCHP (MICROCHIP TECHNOLOGY INCORPORATED)
- FY2025 10-K: …balances of the Company's receivables. Note 3 . Geographic and Segment Information The Company's business is made up of two operating segments, semiconductor products and technology licensing. These segments represent management's view of the business for which separate financial information is available and…
- FY2025 10-K: …the Company's manufacturing capabilities to help ensure the efficiency of the Company's operations and fulfillment of customer requirements. The technology licensing segment includes sales and licensing of the Company's intellectual property. The CODM uses segment gross profit for evaluating each segment's…
- DIOD (DIODES INC /DEL/)
- FY2025 10-K: …of Financial Condition and Results of Operations - Business Outlook" in Part II, Item 7 and "Risk Factors - The success of our business depends on the strength of the global economy and the stability of the financial markets, and any weaknesses in these areas may have a material adverse effect on our net sales,…
- FY2025 10-K: …and does not, imply a relationship with, or endorsement or sponsorship of us by, the trade name or trademark owners. All trademarks appearing in this Annual Report not owned by us are the property of their holders. COMPETITION Numerous s emiconductor manufacturers and distributors serve the discrete, logic, analog,…
- MTSI (MACOM Technology Solutions Holdings, Inc.)
- FY2025 10-K: …and Personnel We face intense competition in our industry, and our inability to compete successfully could negatively affect our operating results. The semiconductor industry is highly competitive. While we compete with a wide variety of companies, our significant competitors include, among others , ADI, Broadcom,…
- FY2025 10-K: …our distributors. We believe the primary drivers of our future revenue growth will include: • continued growth in the demand for high-performance analog, digital and optical semiconductors in our three primary markets; • introducing new products using advanced technologies, added features, higher levels of…
- SMTC (SEMTECH CORP)
- FY2025 10-K: …and, in certain cases, our ability to persuade customers to design these new products into their applications. Semiconductor Industry The semiconductor industry is characterized by decreasing average unit selling prices over the life of a product and as volumes increase. However, price decreases can sometimes be…
- FY2025 10-K: …cycles that characterize the industry. The timing, length and volatility of these cycles are difficult to predict. The semiconductor industry has historically been cyclical due to sudden changes in demand, the amount of manufacturing capacity and changes in the technology employed in semiconductors. The rate of…
- SWKS (SKYWORKS SOLUTIONS, INC.)
- FY2025 10-K: …Also, this competition has resulted in, and is expected to continue to result in, declining average selling prices for many of our products and increased challenges in maintaining or increasing revenue, gross margin, and market share. Furthermore, additional competitors may enter our markets as a result of growth…
- FY2025 10-K: …future business activities. Uncertainty and economic weakness could result in a market contraction and, as a result, our business, results of operations, and financial condition would likely be materially and adversely affected. Such periods of industry downturn are characterized by diminished product demand and…
- QRVO (Qorvo, Inc.)
- FY2025 10-K: …affect our operating results through lower prices for our products, reduced demand for our products, losses of existing design slots with key customers and a corresponding reduction in our ability to recover development, engineering and manufacturing costs. For example, due to lower profitability from increased…
- FY2025 10-K: …by rapid advances in technology and new product introductions. Our customers' product life cycles can be short, especially in mobile devices, and our competitiveness depends on our ability to improve our products and processes faster than our competitors, anticipate changing customer requirements and successfully…
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.