Analog devices (ADI) are gaining but the market is lagging behind: what you need to know

Analog Devices (ADI) ended the most recent trading session at $116.76, marking a +0.02% increase from the previous day. The move lagged the S&P 500’s daily gain of 0.27%. Meanwhile, the Dow gained 1.31% and the Nasdaq, a technology-based index, lost 0.39%.

As of today, shares of the semiconductor maker have lost 6.38% in the past month. At the same time, the Computer and Technology sector gained 6.66%, while the S&P 500 gained 6.66%.

ADI will be looking to show strength as it approaches its next earnings release on August 19, 2020. On that date, ADI is expected to report earnings per share of $1.33, 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.

For the full year, our Zacks Consensus Estimates suggest that analysts are expecting earnings of $4.65 per share and revenue of $5.49 billion. These totals would represent changes of -9.71% and -8.29%, respectively, compared to last year.

Investors should also note any recent changes to analyst estimates for ADI. Recent changes usually reflect the latest short-term business trends. As a result, we can consider positive estimate revisions as a good forecast for the company’s business prospects.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can take advantage of this by using the Zacks Rank. This model takes these estimate changes into account and provides a simple, practical 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, our consensus EPS projection has moved 8.73% higher over the last 30 days. ADI is currently sporting a Zacks Rank of #2 (Buy).

Looking at the valuation, ADI currently has a Forward P/E of 25.02. This valuation represents a discount to its industry’s average Forward P/E of 36.89.

It is also worth mentioning that ADI has a PEG ratio of 1.88. This popular ratio is similar to the commonly known P/E ratio, with the difference that the PEG ratio also takes into account the expected growth dynamics of the company’s earnings. Semiconductor – Analog and mixed stocks have an average 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, putting 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 industries that receive a top 50% rating outperform the bottom half by a factor of 2 to 1.

To track ADI in the upcoming trading sessions, be sure to stay tuned to Zacks.com.

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