Semtech (NASDAQ:SMTC), a firm focusing on analog and mixed-signal semiconductors, experienced a stock increase of nearly 9% during Monday’s trading. This surge comes amidst revitalized optimism following trade talks between U.S. and Chinese officials, which have sparked speculation that export restrictions on critical technologies may be eased. Semiconductor firms like Semtech have been particularly adversely affected by these trade conflicts, as their vital technologies face stringent export limitations. Semtech’s stock continues to be down by 33% year-to-date in 2025.
That being said, we believe that Semtech stock appears less appealing, making it a poor choice to purchase at its current price of approximately $41. We have several concerns regarding SMTC stock that contribute to its unattractiveness considering that its existing valuation seems exceedingly high. Our conclusion is reached by evaluating the current valuation of SMTC stock against its operating performance in recent years and its present and past financial situation. Our assessment of Semtech across critical metrics of Growth, Profitability, Financial Stability, and Downturn Resilience reveals that the firm has a moderate operating performance and financial condition, as detailed below. However, if you are looking for potential gains with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having surpassed the S&P 500 and yielding returns greater than 91% since its inception.
How Does Semtech’s Valuation Look Compared to The S&P 500?
In terms of what you pay per dollar of sales or profit, SMTC stock appears to be pricey in comparison to the wider market.
• Semtech has a price-to-sales (P/S) ratio of 3.4 against a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 52.6 compared to 20.5 for the S&P 500
How Have Semtech’s Revenues Increased Over Recent Years?
Semtech’s Revenues have experienced significant growth over recent years.
• Semtech’s revenue has increased at an average rate of 7.2% over the past 3 years (compared to a rise of 5.5% for the S&P 500)
• Its revenues have expanded 4.7% from $869 Million to $909 Million in the last 12 months (against a rise of 5.5% for the S&P 500)
• Furthermore, its quarterly revenues rose 30.1% to $251 Million in the latest quarter from $193 Million a year prior (versus a 4.8% growth for the S&P 500)
How Profitable Is Semtech?
Semtech’s profit margins are considerably worse than most companies within the Trefis coverage universe.
• Semtech’s Operating Income over the last four quarters was $62 Million, reflecting a poor Operating Margin of 6.9% (compared to 13.2% for the S&P 500)
• Semtech’s Operating Cash Flow (OCF) during this time was $58 Million, indicating a poor OCF Margin of 6.4% (versus 14.9% for the S&P 500)
• Over the last four-quarter period, Semtech’s Net Income was $-162 Million – signifying a very poor Net Income Margin of -17.8% (compared to 11.6% for the S&P 500)
Does Semtech Appear Financially Stable?
Semtech’s balance sheet appears solid.
• Semtech’s Debt stood at $558 Million at the close of the most recent quarter, while its market capitalization is $3.4 Billion (as of 6/9/2025). This results in a moderate Debt-to-Equity Ratio of 18.3% (compared to 19.9% for the S&P 500). [Note: A low Debt-to-Equity Ratio is favored]
• Cash (including cash equivalents) constitutes $164 Million of the $1.4 Billion in Total Assets for Semtech. This gives a strong Cash-to-Assets Ratio of 11.6% (against 13.8% for the S&P 500)
How Resilient Is SMTC Stock During A Downturn?
SMTC stock has experienced an effect that was slightly more severe than the benchmark S&P 500 index during certain recent downturns. Concerned about the effect of a market crash on SMTC stock? Our dashboard How Low Can Semtech Stock Go In A Market Crash? provides a comprehensive analysis of how the stock performed during and after previous market crashes.
Inflation Shock (2022)
• SMTC stock decreased 85.4% from a peak of $91.99 on November 19, 2021, to $13.43 on November 1, 2023, in comparison to a peak-to-trough decline of 25.4% for the S&P 500
• The stock is still not back to its pre-Crisis peak
• The highest the stock has reached since then is 77.15 on January 21, 2025, and it is currently trading at around $41
Covid Pandemic (2020)
• SMTC stock fell 50.9% from a high of $54.97 on January 17, 2020, to $26.99 on March 16, 2020, while the S&P 500 experienced a peak-to-trough drop of 33.9%
• The stock fully bounced back to its pre-Crisis peak by June 5, 2020
Global Financial Crisis (2008)
• SMTC stock declined 58.1% from a high of $21.03 on October 1, 2007, to $8.82 on November 19, 2008, compared to a peak-to-trough drop of 56.8% for the S&P 500
• The stock completely recovered to its pre-Crisis high by October 27, 2010
Putting All The Pieces Together: What It Means For SMTC Stock
In conclusion, Semtech’s performances across the parameters outlined above are as follows:
• Growth: Very Strong
• Profitability: Very Weak
• Financial Stability: Strong
• Downturn Resilience: Neutral
• Overall: Neutral
However, in consideration of its extremely high valuation, we maintain that the stock is unattractive, reinforcing our assertion that SMTC is a poor stock to acquire.
While it would be advisable to steer clear of SMTC stock right now, you might want to look into the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to generate strong returns for investors. Why is that? The quarterly rebalanced mix of large, mid, and small-cap RV Portfolio stocks provided an effective strategy to capitalize on favorable market conditions while minimizing losses when markets decline, as detailed in RV Portfolio performance metrics.