Is Semtech Corp. overvalued or undervalued?

As of 7 June 2023, the valuation grade for Semtech Corp. has moved from fair to risky, indicating a significant shift in its perceived value. The company is currently considered overvalued, particularly when compared to its peers. Semtech's P/E ratio stands at 84, which is substantially higher than the industry average, while its EV to EBITDA ratio is 28.83, further highlighting its inflated valuation. Additionally, the PEG ratio of 0.70 suggests that despite the high P/E, the growth expectations may not justify the price.
In comparison, peers such as MaxLinear, Inc. and Cohu, Inc. exhibit negative P/E ratios of -6.03 and -10.96, respectively, which underscores the relative overvaluation of Semtech. The company's ROCE of 10.03% and ROE of 7.89% are also lower than what might be expected given its high valuation metrics. While Semtech has shown a strong one-year return of 36.23%, this performance is overshadowed by a year-to-date decline of 33.61%, suggesting that the market is reassessing its growth prospects. Overall, Semtech Corp. appears to be overvalued in the current market environment.