Analog Devices scores 71 for management and 68 for moat. The management score rests on a return on invested capital of 5.4% and a gross margin of 61.5% — figures that describe a business earning a respectable return on what it employs. Debt sits at 0.26x equity.
Three independent anchors set the price worth paying. Growth is modelled at 14.5% a year, the rate measured from the filings. The exit multiple assumed is 29.0x. That produces an intrinsic value of $233.50, a 10-CAP price of $104.42 and a payback time price of $161.03, with the value zone set at the highest of the three, $161.03. Today's price of $404.60 is 151% above it.
The price is above the value zone and the business scores 68 for moat and 71 for management. Neither test argues for paying up here.
| Price | $404.60 |
| Market cap | $197.1B |
| P/E ratio | 48.0x |
| Return on invested capital | 5.4% |
| Gross margin | 61.5% |
| Debt to equity | 0.26x |
| Free cash flow yield | 3.7% |
| Growth rate used | 14.5% |
| Growth rate measured | 14.0% |
| Exit multiple assumed | 29.0x |
| Company | Moat | Buy price |
| Qualcomm Inc. (QCOM) | 71 | $151.77 |
| Marvell Technology (MRVL) | 74 | $38.42 |
| Texas Instruments (TXN) | 37 | $69.01 |
| KLA Corporation (KLAC) | 86 | $50.39 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Analog Devices rather than accepting ours.