Analog DevicesADI

Is the price high or low right now, compared to what the market usually pays?

→At 44.3x earnings, the market is paying +54% more than ADI's own 6-year median of 28.8x. Expectations are elevated, so more has to go right to justify the price. Today's multiple is the highest in the charted history.

What has the market paid for ADI over the years?

→At 44.3x earnings, the market is paying +54% more than ADI's own 6-year median of 28.8x. Expectations are elevated, so more has to go right to justify the price. Today's multiple is the highest in the charted history.

What cash return does the business throw off per dollar of market value?

2.8%FCF yield today

→At 2.8%, you get less cash per dollar of market value than the 6-year median of 4.8% - the market is charging more for the same cash.

Revenue: is the business selling more than it used to?

→Revenue reached $12.3B in 2023, compounding +30% a year since 2020 and the pace is picking up. The trailing twelve months are already running at $13.9B, ahead of the last full year.

Net income: how much of that revenue becomes profit?

→Net income was $3.3B in 2023, compounding +40% a year over three years. Trailing twelve-month profit stands at $4.1B.

How fast is it growing, year by year?

+2%revenue growth, FY 2023

→In 2023 revenue grew +2% while earnings moved +21% - when the earnings line runs above revenue, each new dollar of sales is arriving more profitably.

Revenue per share: is your slice growing as fast as the company?

$24.32revenue per share, FY 2023

→Revenue per share reached $24.32 in 2023, compounding +17% a year against +30% for ADI as a whole. Dilution absorbed about 12.7 points of that growth. Free cash flow per share stands at $7.03.

Margins: of every $1 of sales, how much survives each cost layer?

→Operating margin widened 4 points to 31% since 2020. After everything, 27 cents of each sales dollar reaches net profit.

Earnings quality: do the reported profits turn into real cash?

→Operating cash flow runs at 134% of reported profit, so the earnings are more than backed by cash - depreciation and other non-cash charges are understating what the business actually collects.

What does it earn on the money it uses?

→ROE 9% and ROCE 8% sit close together - the returns come from the business itself, not from borrowing.

Where does each dollar of revenue actually go?

→Of $12.3B in sales, $7.9B survives production costs, $3.8B survives running the company, and $3.3B - 27¢ of every dollar - reaches the bottom line.

How much of every sales dollar ends up as free cash?

→29 cents of every sales dollar became free cash in 2023, down 4 points since 2020.

What does staying competitive cost, per dollar of sales?

→The biggest claim on each sales dollar is research and development, at 13% of revenue (capital spending 10%, stock compensation 2%). That share has fallen since 2020, so the cost of competing is easing.

When sales grow, do profits grow faster?

→Operating profit outgrew revenue in 3 of the last 5 years, most recently +17% against +2%. Each additional dollar of sales is landing more profitably than the last - the definition of operating leverage.

Does ADI earn more on its capital than that capital costs?

→ADI earns 8.4% on the capital it employs, below the 10% most investors treat as the cost of capital. It was 7.6% in 2020, so the trend is up, though the pace has cooled.

Could it handle its debt if things went wrong?

→Debt of $8.1B sits against $3.3B of cash, or 0.2x shareholders' equity. Earnings cover the interest bill 14 times over, so the debt is comfortably serviced.

Is the company's own capital growing or shrinking?

→The company's own capital shrank from $35.5B in 2023 to $33.6B (-6%). Buybacks or losses are drawing the buffer down - the distinction matters.

How much goes back to shareholders - and how much leaks out as stock compensation?

→$4.6B returned last year against $300M of stock issued to employees - the returns outweigh the dilution 15.5-to-1.

How fast is your ownership being diluted - or concentrated?

→The count shrank 3.3% last year - buybacks are outrunning stock compensation.

Is the dividend cheque itself growing?

→Up from $1.64 to $3.32 per share over 7 years - the cheque keeps growing.

What does the payout earn you at each year's prices?

→At today's price the yield is 1.0%.

Can it actually afford the dividend?

→Comfortable: 51% of profits and 47% of free cash flow go out as dividends - well inside what the business generates.

ADI has issued or retired shares - did shareholders end up better off?

→ADI issued +73% more shares from 2009 to 2023, but revenue per share still rose +253%. The dilution bought more growth than it cost existing holders.

How is ADI's trend actually behaving right now?

→ADI is in a downtrend. The price is below the band where recent trading settled and that band is still falling, so nothing in the picture has turned yet. Both the last two weeks and the month-ago comparison point down as well, so nothing here disagrees with the downtrend.

Are the people running it buying or selling with their own money?

→No open-market buying, and $16M of selling across 6 months. Selling alone is a weak signal - much of it is pre-scheduled - but the absence of buying tells you no insider saw the price as a bargain.