Analog Devices, Inc. (ADI)
Semiconductores / Chips
One of the world's largest manufacturers of analog and mixed-signal semiconductors, with a wide moat built on switching costs and six decades of track record, trading at a multiple that already discounts a full cyclical recovery and several years of growth driven by artificial-intelligence data center content — Overvalued at market price.
- Price
- $372.56
- Intrinsic value (5y, base)
- $229
- Total annual return (5y)
- -7.4%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- Portfolio of more than 75,000 part numbers and close to 4,780 U.S. patents; the cost of redesigning a system to replace an analog component sustains multi-year customer relationships.
- The revenue recovery (TTM +29.8% year over year) is a rebound from the FY2024 trough driven by distributor inventory normalization, not a sustainable pace going forward.
- Today's entry multiple (EV/NOPAT ~55×) sits well above the terminal band for the analog-semis archetype (18-24×); the bull scenario compresses the multiple but still falls short of justifying the current price.
Intrinsic value — two valuation methods
Total return at 5 years: -7.4%/year = -9.3% appreciation + 1.8% dividend. The target price ($229) is ex-dividend; the $28 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $332 · Multiples $208) is below the market price ($373).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $373 trades ~79.1% above its value discounted to today (~$208); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$132.
Thesis
The business
Analog Devices is a genuinely high-quality business: a wide moat from switching costs in analog design, a broad patent base (close to 4,780 in the United States), six decades of track record, and a flexible manufacturing scale that combines owned plants with external foundries such as TSMC. Revenue has been recovering strongly from the FY2024 cyclical trough, and the Communications segment benefits from demand for artificial-intelligence data center infrastructure.
The valuation
It is valued as a single business on EV/NOPAT, analog-semis archetype (18-24× band, twin of Texas Instruments). The base scenario decelerates revenue from the average of the FY23-TTM trajectory (~6.5%, not the +29.8% rebound) toward terminal growth of ~4.5%, with an exit multiple of 21× at the midpoint of the band. The resulting 5-year value is $229 per share.
The margin of safety
At the market price ($373) the business trades at an EV/NOPAT of roughly 45×, well above the archetype's terminal band of 18-24×; even the favourable scenario falls short of justifying the current price. The verdict is Overvalued: No margin of safety: the price already discounts a demanding scenario.
What to watch
The central disconfirmer is whether the revenue rebound (TTM +29.8% year over year) turns out to be largely distributor restocking rather than a structural acceleration of demand. If growth converges below the bear scenario, the terminal multiple should move toward the floor of the archetype band, widening the gap with the market price.
Educational / informational. Does not constitute investment advice.