It's been a great afternoon session for Cirrus Logic investors, who saw their shares rise 8.6% to a price of $103.06 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Cirrus Logic, Inc., a fabless semiconductor company, provides low-power and high-precision mixed-signal processing solutions in the United States and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 26.5 and an average price to book (P/B) ratio of 5.57. In contrast, Cirrus Logic has a trailing 12 month P/E ratio of 16.6 and a P/B ratio of 3.5.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
Cirrus Logic's PEG ratio is 3.26, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.