ADI

We rate ANALOG DEVICES INC (ADI) as a Buy with a composite score of 70.7/100 at a current price of $358.16. The stock scores above average across the majority of our six quantitative factors and ranks #82 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (83th percentile) and quality (77th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (53/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

ANALOG DEVICES INC holds a lower-quartile position (#43 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 70.7/100 places it at rank #82 in our full 7,333-stock universe. With a $115.2B market capitalization, ANALOG DEVICES INC operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 37% and momentum in the 71th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 47th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 62% (+19.2pp vs sector) narrow to operating margins of 26% (+25.2pp vs sector) and net margins of 20.5%, yielding a gross-to-net conversion rate of 33%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $358.16, ANALOG DEVICES INC appears undervalued relative to its fundamentals. Our value factor score of 83/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 75.1x (a 237% premium to the sector median of 22.3x), EV/EBITDA of 58.1x (at a premium), P/B of 5.1x, P/S of 15.6x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to ANALOG DEVICES INC. The stock presents a balanced risk profile: elevated market sensitivity (beta of 1.60) and elevated valuation multiple (P/E 75.1x) that leaves limited margin for error. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.60); elevated valuation multiple (P/E 75.1x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 69th percentile and quality factor at the 77th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 62% provide a buffer against cost pressures; above-average stability (69th percentile) suggests predictable business dynamics; large-cap scale ($115.2B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate ANALOG DEVICES INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 6.8%, and the balance sheet is managed within acceptable parameters (D/E: 42%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; ANALOG DEVICES INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.66% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, ANALOG DEVICES INC receives a Buy rating with a composite score of 70.7/100 (rank #82 of 7,333). Our quantitative framework assigns a Narrow Moat (53/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 70/100.

Our analysis supports a constructive view on ANALOG DEVICES INC. The combination of identifiable competitive advantages, medium uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.