Analog Devices has had an impressive run over the past six months as its shares have beaten the S&P 500 by 8.9%. The stock now trades at $390.17, marking a 20% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy Analog Devices, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Analog Devices Not Exciting?
Despite the momentum, we’re cautious about Analog Devices. Here are two reasons why there are better opportunities than ADI, plus one stock we’d rather own.
1. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Analog Devices’s revenue to rise by 27.4%. While this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.
2. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Analog Devices historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.2%, somewhat low compared to the best semiconductor companies.
Final Judgment
Analog Devices isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 26.9× forward P/E (or $390.17 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the Amazon and PayPal of Latin America.
Stocks We Would Buy Instead of Analog Devices
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Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.