Linear Technology is suitable for the Enterprising Investor, but not for the more conservative Defensive Investor, who is concerned about the insufficient earnings growth over the last ten years, along with the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns as the company passes all of the investor type’s requirements. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
When it comes to valuation, it is critical to consider the company’s earnings history. In this case, Linear Technology has grown its EPSmg (normalized earnings) from $1.83 in 2011 to only an estimated $1.91 for 2015. This lack of demonstrated growth does not support the market’s implied estimate for earnings growth of 7.98% over the next 7-10 years. Therefore, the model returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.
Be sure to check out previous ModernGraham valuations of Linear Technology Corporation (LLTC) for a greater perspective!
Disclaimer: The author did not hold a position in Linear Technology Corporation (LLTC) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.