CRDO Drops 16% In A Week, Should You Buy The Stock Despite Its High Valuation?
We believe there is not much to fear in CRDO 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 | Strong |
| Financial Stability | Very Strong |
| Downturn Resilience | Moderate |
| 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 $25 Bil in market cap, Credo Technology provides high-speed connectivity solutions for optical and electrical Ethernet applications, including integrated circuits, active electrical cables, SerDes chiplets, and SerDes IP licensing.
[1] Valuation Looks Very High
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| CRDO | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 41.3 | 3.2 |
| Price-to-Earnings Ratio | 197.9 | 23.4 |
| Price-to-Free Cash Flow Ratio | 264.9 | 20.9 |
This table highlights how CRDO is valued vs broader market. For more details see: CRDO Valuation Ratios
[2] Growth Is Very Strong
- Credo Technology has seen its top line grow at an average rate of 74.4% over the last 3 years
- Its revenues have grown 176% from $218 Mil to $600 Mil in the last 12 months
- Also, its quarterly revenues grew 273.6% to $223 Mil in the most recent quarter from $60 Mil a year ago.
| CRDO | S&P 500 | |
|---|---|---|
| 3-Year Average | 74.4% | 5.3% |
| Latest Twelve Months* | 175.8% | 5.1% |
| Most Recent Quarter (YoY)* | 273.6% | 6.1% |
This table highlights how CRDO is growing vs broader market. For more details see: CRDO Revenue Comparison
[3] Profitability Appears Strong
- CRDO last 12 month operating income was $113 Mil representing operating margin of 18.9%
- With cash flow margin of 21.1%, it generated nearly $126 Mil in operating cash flow over this period
- For the same period, CRDO generated nearly $125 Mil in net income, suggesting net margin of about 20.8%
| CRDO | S&P 500 | |
|---|---|---|
| Current Operating Margin | 18.9% | 18.6% |
| Current OCF Margin | 21.1% | 20.3% |
| Current Net Income Margin | 20.8% | 12.7% |
This table highlights how CRDO profitability vs broader market. For more details see: CRDO Operating Income Comparison
[4] Financial Stability Looks Very Strong
- CRDO Debt was $16 Mil at the end of the most recent quarter, while its current Market Cap is $25 Bil. This implies Debt-to-Equity Ratio of 0.06%
- CRDO Cash (including cash equivalents) makes up $480 Mil of $905 Mil in total Assets. This yields a Cash-to-Assets Ratio of 53.0%
| CRDO | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 0.1% | 21.0% |
| Current Cash-to-Assets Ratio | 53.0% | 7.0% |
[4] Downturn Resilience Is Moderate
CRDO saw an impact slightly better 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.
2022 Inflation Shock
- CRDO stock fell 62.0% from a high of $19.36 on 14 February 2023 to $7.35 on 4 May 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 15 December 2023
- Since then, the stock increased to a high of $172.31 on 18 September 2025 , and currently trades at $142.93
| CRDO | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -62.0% | -25.4% |
| Time to Full Recovery | 225 days | 464 days |
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 CRDO 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.