ALAB Leaps 11% In One Week, Things To Be Wary Of When Buying The Stock
We believe there is nothing to fear in ALAB stock given its overall Very Strong operating performance and financial condition. Hence, despite its Very High valuation, the stock appears Attractive but Volatile. Here is our multi-factor assessment.
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Very High |
| What you get: | |
| Growth | Very Strong |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | N/A |
| Operating Performance | Very Strong |
| Stock Opinion | Attractive but Volatile |
But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure
Let’s get into details of each of the assessed factors but before that, for quick background: With $40 Bil in market cap, Astera Labs provides semiconductor-based connectivity solutions designed to optimize cloud and AI infrastructure performance through innovative design and advanced technology.
[1] Valuation Looks Very High
| ALAB | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 65.5 | 3.2 |
| Price-to-Earnings Ratio | 396.0 | 24.2 |
| Price-to-Free Cash Flow Ratio | 188.5 | 21.1 |
This table highlights how ALAB is valued vs broader market. For more details see: ALAB Valuation Ratios
[2] Growth Is Very Strong
- Astera Labs has seen its top line grow at an average rate of 163.8% over the last 3 years
- Its revenues have grown 164% from $230 Mil to $606 Mil in the last 12 months
- Also, its quarterly revenues grew 149.7% to $192 Mil in the most recent quarter from $77 Mil a year ago.
| ALAB | S&P 500 | |
|---|---|---|
| 3-Year Average | 163.8% | 5.3% |
| Latest Twelve Months* | 163.8% | 5.1% |
| Most Recent Quarter (YoY)* | 149.7% | 6.1% |
This table highlights how ALAB is growing vs broader market. For more details see: ALAB Revenue Comparison
[3] Profitability Appears Moderate
- ALAB last 12 month operating income was $42 Mil representing operating margin of 7.0%
- With cash flow margin of 41.1%, it generated nearly $249 Mil in operating cash flow over this period
- For the same period, ALAB generated nearly $100 Mil in net income, suggesting net margin of about 16.5%
| ALAB | S&P 500 | |
|---|---|---|
| Current Operating Margin | 7.0% | 18.6% |
| Current OCF Margin | 41.1% | 20.3% |
| Current Net Income Margin | 16.5% | 12.6% |
This table highlights how ALAB profitability vs broader market. For more details see: ALAB Operating Income Comparison
[4] Financial Stability Looks Very Strong
- ALAB Debt was $0.0 at the end of the most recent quarter, while its current Market Cap is $40 Bil. This implies Debt-to-Equity Ratio of 0.0%
- ALAB Cash (including cash equivalents) makes up $1.1 Bil of $1.3 Bil in total Assets. This yields a Cash-to-Assets Ratio of 83.8%
| ALAB | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 0.0% | 20.9% |
| Current Cash-to-Assets Ratio | 83.8% | 7.0% |
[4] Downturn Resilience Is N/A
ALAB has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ALAB Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.