Latest news with #AdeiaInc
Yahoo
13-05-2025
- Business
- Yahoo
We Think Adeia's (NASDAQ:ADEA) Robust Earnings Are Conservative
Adeia Inc. (NASDAQ:ADEA) recently posted some strong earnings, and the market responded positively. We did some digging and found some further encouraging factors that investors will like. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking. Adeia has an accrual ratio of -0.14 for the year to March 2025. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. In fact, it had free cash flow of US$184m in the last year, which was a lot more than its statutory profit of US$75.5m. Adeia shareholders are no doubt pleased that free cash flow improved over the last twelve months. Having said that, there is more to the story. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. Check out our latest analysis for Adeia That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Adeia's profit was reduced by unusual items worth US$17m in the last twelve months, and this helped it produce high cash conversion, as reflected by its unusual items. In a scenario where those unusual items included non-cash charges, we'd expect to see a strong accrual ratio, which is exactly what has happened in this case. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Adeia to produce a higher profit next year, all else being equal. Considering both Adeia's accrual ratio and its unusual items, we think its statutory earnings are unlikely to exaggerate the company's underlying earnings power. Looking at all these factors, we'd say that Adeia's underlying earnings power is at least as good as the statutory numbers would make it seem. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Adeia has 1 warning sign and it would be unwise to ignore it. After our examination into the nature of Adeia's profit, we've come away optimistic for the company. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
25-03-2025
- Business
- Yahoo
Is Adeia Inc.'s (NASDAQ:ADEA) 16% ROE Strong Compared To Its Industry?
One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. To keep the lesson grounded in practicality, we'll use ROE to better understand Adeia Inc. (NASDAQ:ADEA). Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. The formula for ROE is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Adeia is: 16% = US$65m ÷ US$397m (Based on the trailing twelve months to December 2024). The 'return' refers to a company's earnings over the last year. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.16. Check out our latest analysis for Adeia By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. The image below shows that Adeia has an ROE that is roughly in line with the Software industry average (15%). That isn't amazing, but it is respectable. Although the ROE is similar to the industry, we should still perform further checks to see if the company's ROE is being boosted by high debt levels. If so, this increases its exposure to financial risk. Most companies need money -- from somewhere -- to grow their profits. That cash can come from issuing shares, retained earnings, or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same. It's worth noting the high use of debt by Adeia, leading to its debt to equity ratio of 1.20. While its ROE is pretty respectable, the amount of debt the company is carrying currently is not ideal. Debt does bring extra risk, so it's only really worthwhile when a company generates some decent returns from it. Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE. But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So you might want to take a peek at this data-rich interactive graph of forecasts for the company. If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
10-03-2025
- Business
- Yahoo
Adeia Inc. (ADEA): Why Are Analysts Bullish On This Cheap Software Stock?
We recently compiled a list of the . In this article, we are going to take a look at where Adeia Inc. (NASDAQ:ADEA) stands against the other cheap software stocks. The software industry is changing at an unparalleled rate, with significant advances in programming languages, structures, frameworks, techniques, and other technologies. More specifically, the industry has benefited greatly from the growing need for digital transformation. Until recently, growth prospects have been attractive due to the rising use of Software-as-a-Service (SaaS), which offers a flexible and cost-effective distribution mechanism for apps. It also reduces deployment time compared to traditional systems. In that regard, the global SaaS industry was valued at around $3 trillion in 2022, marking the end of a decade of strong development, with McKinsey estimating that it might reach $10 trillion by 2030. However, McKinsey contends that the rapid emergence of generative AI (GenAI) has altered the software industry more drastically than the shift to SaaS. A notable example is ChatGPT's introduction in late November 2022, which sparked a surge in investment. By 2023, large software firms had already invested over $15 billion in GenAI solutions, accounting for roughly 2% of the global corporate software industry. In contrast, it took SaaS spending four years to get the same market share. At the same time, IT executives are turning to technology consolidation to address global economic concerns such as inflation, recession, and supply chain disruptions. According to Canalys' IT Opportunity report, global IT investment would increase by 8.3% to $5.44 trillion in 2025. This builds on the rapid growth in 2024, which is expected to climb 7.7%, the fastest pace since the post-COVID technological boom of 2021. In that same vein, The Business Research Company predicts that the global software products market will rise from $1.8 trillion in 2024 to over $2.0 trillion in 2025, representing an 11.7% compound annual growth rate (CAGR). While challenges exist on the path to growth, the bigger concern for the software industry at the moment is DeepSeek, a Chinese company that claims to produce artificial intelligence software at a fraction of the expense of large US software corporations. DeepSeek's cheaper price should have forced US companies to reduce subscription costs and investments. However, this has had minimal effect on market sentiment towards American firms. In fact, AI income still accounts for a modest portion of their total revenues, and their supremacy remains largely intact. Furthermore, DeepSeek's danger doesn't seem to be immediate, as major US software companies have spent years improving and growing their corporate products. For our list of cheap software stocks to buy according to analysts, we used stock screeners to select firms with an average analyst upside potential of at least 20% greater than their current stock price. According to Wall Street experts, these equities are undervalued compared to their actual potential. All of these stocks have PE ratios below 25, as of March 7. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here). An entertainment executive in a recording studio, cutting a record for the next hit song. Forward P/E Ratio: 10.35 Analyst Upside: 22.53% Adeia Inc. (NASDAQ:ADEA) is a leading research and development business that accelerates the adoption of innovative technologies in the media, entertainment, and semiconductor sectors. It operates as a licensing company, licensing its ideas under the Adeia brand. On February 19, Rosenblatt Securities raised the price target for Adeia Inc. (NASDAQ:ADEA) from $18 to $20 while maintaining a Buy rating on the company's shares. The boost came after Adeia announced a solid fourth-quarter 2024 performance that exceeded expectations. A highlight of the quarter was the quick completion of a semiconductor hybrid bonding licensing agreement, which took only six months to conclude. Adeia Inc. (NASDAQ:ADEA)'s non-PayTV income also increased significantly, rising 18% year on year in 2024. This increase is especially important since it helps to offset the continued drop of PayTV subscribers, which is a trend across the industry. Furthermore, the company recently extended its intellectual property license arrangement with South Korea's LG U+, assuring ongoing access to Adeia's broad media library. Overall ADEA ranks 8th on our list of the cheap software stocks to buy according to analysts. While we acknowledge the potential of ADEA as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ADEA but that trades at less than 5 times its earnings, check out our report about the . READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey. Sign in to access your portfolio
