Adeia’s common shares will need to reach $19 to achieve average annual stock market performance of 9.0% over the next 6 years. Adeia’s stock price will need to reach $22 by 2029 to achieve upper quartile performance. What is the market’s view of Adeia’s future operating performance as reflected in the current price of $11?
Executive Summary
- Price Target Research identifies Adeia as having: very high profitability, below average financial strength, instability, and below average expected growth. A big negative influence on Adeia’s valuation is its poor Growth.
- Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Adeia Peer Group. Recent market returns have outperformed the Adeia Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Adeia shares should reach a level of $9 by 2029 — an -1.1% per year total shareholder return. A 2029 stock price of $19 would reflect median performance and a price of $22 would be required to reach upper quartile performance.
- Growth has been Adeia’s biggest valuation weakness. Historical growth has been below average relative to the Adeia Peer Group and forecasted growth is relatively below average. Revenue Growth, Asset Growth, and Equity Growth have lagged. These factors have negatively affected market perceptions of Adeia. Adeia’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Return on Equity is group leading. This factor has strengthened market perceptions of Adeia. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Adeia’s risk profile is unfavorable. Overall variability has been above average with above average revenue variability, above average E.P.S. variability, and relatively low stock price volatility. Financial Strength is only average and earnings’ expectations are only average. The debt/capital ratio has risen very significantly.
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