By Rob Otman
Analog Devices (Nasdaq: ADI) is a large cap company that operates within the semiconductor industry. Its market cap is $31 billion today, and the total one-year return is 43.97% for shareholders.
Analog Devices stock is beating the market, and it reports earnings next week. But does that make it a good buy today? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
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✗ Earnings-per-Share (EPS) Growth: Analog Devices reported a recent EPS growth rate of 32.08%. That’s below the semiconductor industry average of 56.31%. That’s not a good sign. We like to see companies with higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the semiconductor industry is 47.44. And Analog Devices’ ratio comes in at 24.8. It’s trading at a better value than many of its competitors.
✗ Debt-to-Equity: The debt-to-equity ratio for Analog Devices stock is 71.71%. That’s above the semiconductor industry average of 54%. That’s not a good sign. Analog Devices’ debt levels should be lower.
✗ Free Cash Flow per Share Growth: Analog Devices’ FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
✓ Profit Margins: The profit margin of Analog Devices comes in at 22.06% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Analog Devices’ profit margin is above the semiconductor average of 11.43%. So that’s a positive indicator for investors.
✓ Return on Equity: Return on equity tells us how much profit a company produces with the money shareholders invest. The ROE for Analog Devices is 17.75%, and that’s above its industry average ROE of 13.71%.
Analog Devices stock passes three of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here. …read more
Source:: Investment You
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