Semtech stock's chart and its valuation are at odds
Semtech Corporation (NASDAQ:SMTC) is a global supplier of semiconductor products. The stock isn't a household name like its sector peers Intel (INTC) or Advanced Micro Devices (AMD), and for that very reason, SMTC should be on investors' radar.
Semtech stock is up 14% in 2021, and from its current perch at $82.22, is a chip-shot from its Jan. 25 record high of $83.94. The shares gapped higher on Sept. 2 following an upbeat earnings report, forming a bull flag pattern on the charts.
Meanwhile, SMTC's Schaeffer's put/call open interest ratio (SOIR) of 1.19 registers in the 99th percentile of its annual range. This suggests near-term options traders are much more put-heavy than usual right now. Should SMTC extend its recent uptrend, an unwinding of pessimism in the options pits could help propel the security forward this fall.
From a fundamental point of view, Semtech stock has an incredibly rich valuation at the moment. SMTC trades at a price-earnings ratio of 58.86 with a forward price-earnings of 30.40, which are both exceptionally high figures despite a big anticipated improvement on earnings.
Semtech does has a decent balance sheet with $274 million in cash and $199 million in debt. In addition, SMTC has increased revenues 13% and net income 51% since fiscal 2020. Overall, Semtech stock doesn’t truly offer enough growth potential to warrant buying at its current valuation.