Is Analog Devices Stock Getting Ahead of Itself After a Strong 2025 Rally?
- If you are wondering whether Analog Devices is still worth buying at today’s levels, you are not alone. This article will walk through what the current price is really baking in.
- The stock has been on a strong run lately, climbing about 6.0% over the last week, 19.2% over the last month, 33.1% year to date, and 31.1% over the past year. This adds to a hefty 75.0% three year and 116.7% five year gain.
- Recent headlines have focused on Analog Devices positioning itself as a key supplier for industrial, automotive and AI related applications, with investors betting that these structurally growing end markets can support demand even through economic cycles. At the same time, commentators have highlighted how the reshoring of chip supply chains and rising capital investment in automation could give ADI more pricing power and stickier customer relationships.
- Despite this optimism, Analog Devices only scores 1 out of 6 on our undervaluation checks. We will dig into what different valuation methods say about the stock today and then finish by looking at a deeper, narrative driven way to decide what it is really worth.
Analog Devices scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Analog Devices Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a company is worth by projecting its future cash flows and discounting them back to today, to reflect the time value of money and risk.
For Analog Devices, the model starts with last twelve month Free Cash Flow of about $4.0 billion and uses analyst forecasts for the next few years, then extends those projections further into the future. By 2029, Free Cash Flow is expected to reach roughly $6.3 billion. The ten year path from 2026 to 2035 assumes steady growth from about $4.7 billion to $8.3 billion, based on a blend of analyst estimates and Simply Wall St extrapolations.
These projected cash flows are discounted to today using a 2 Stage Free Cash Flow to Equity model, giving an estimated intrinsic value of $162.25 per share. Compared with the current share price, this implies Analog Devices is about 73.4% overvalued on a DCF basis. This suggests investors are paying a large premium to the modelled cash flow outlook.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Analog Devices may be overvalued by 73.4%. Discover 906 undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Analog Devices Price vs Earnings
For profitable companies like Analog Devices, the Price to Earnings, or PE, ratio is often the most intuitive way to think about valuation, as it directly links what investors pay for each share to the earnings that share generates.
In general, companies with stronger growth prospects and lower perceived risk can justify a higher PE ratio, while slower growth or higher uncertainty usually call for a lower, more conservative multiple. Today, Analog Devices trades on a PE of about 60.7x, which is above both the broader Semiconductor industry average of roughly 38.0x and its peer group average of about 68.8x.
Simply Wall St also uses a proprietary “Fair Ratio” to estimate what PE multiple a stock should reasonably trade at, after considering factors like earnings growth, profitability, industry, market cap and specific risks. This tends to be more insightful than simple peer or industry comparisons, which can be skewed by outliers or cyclical swings. For Analog Devices, the Fair Ratio is 31.4x, well below the current 60.7x, suggesting the shares are pricing in more growth and less risk than the fundamentals justify.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Analog Devices Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Analog Devices business story to a financial forecast and, ultimately, to your own fair value estimate. A Narrative on Simply Wall St is your story behind the numbers, where you spell out how you think ADI’s revenues, margins and earnings will evolve, and the platform then turns that story into a forecast and a fair value that you can easily compare to today’s share price to assess whether it looks like a buy, hold, or sell. Narratives live inside the Community page used by millions of investors, are easy to set up, and automatically update when new news, earnings or guidance arrive, so your valuation stays in sync with reality. For ADI, one investor might build a bullish Narrative that focuses on AI, robotics and automotive tailwinds and lands near a fair value around $310. A more cautious investor might emphasize cyclicality, competition and margin risk and arrive closer to $155 instead.
Do you think there's more to the story for Analog Devices? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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