Analog Devices (ADI) currently trades below where its was five years ago, down from about $45 to $33. During a period when the S&P is up 25%, ADI is down 25%. That’s quite a delta.
Like many stocks that have fallen on hard times, the board has approved a share buyback and the company has just increased its dividend.
But, the company may have hit a turn in the road. Piper Jaffray recently pointed out that the company’s bookings decline has probably hit bottom. It raised its rating on the stock from "underperform" to "marketperform".
After a dip in operating income in 2005, the company’s numbers have started to move up again. Net income rose 19% in the last quarter to $145 million.
As Morningstar pointed out recently: "Analog Devices had double-digit operating margins in all but one of the past 10 years. We believe the firm’s (non-GAAP) operating margin can reach above the 30s over the long run on a full-cycle basis."
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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