• If you are wondering whether MACOM Technology Solutions Holdings at around US$222.55 is still reasonably priced after its strong run, you are not alone. This article will focus on what that price might imply about value.
• The stock has seen a 6.9% decline over the past week and a 5.6% decline over the past month, yet it still sits on returns of 27.2% year to date and 108.0% over the past year, with a 224.5% return over three years and 233.3% over five years.
• Recent attention on the semiconductor space has kept MACOM in focus, and news flow around chip demand, data center build outs, and communications infrastructure has helped frame expectations for companies like this. These developments give important background for how investors might be thinking about both its potential and its risks.
• Despite that track record, MACOM currently scores 0 out of 6 on our valuation checks, as shown in this valuation score. Next we will look at different ways to assess what the market is pricing in today and finish with a framework that can help you think about value even more clearly.

MACOM Technology Solutions Holdings scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: MACOM Technology Solutions Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those back to today, so you can compare that value with the current share price.

For MACOM Technology Solutions Holdings, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $151.8 million. Analyst estimates and extrapolations point to projected free cash flow of $483.8 million in 2028, with further projections extending out to 2035 supplied by Simply Wall St.

When all of those projected cash flows are discounted back to today, the DCF model suggests an intrinsic value of about $112.36 per share. Compared with the recent share price of around $222.55, this output from the model indicates that the stock is about 98.1% overvalued on this particular basis.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests MACOM Technology Solutions Holdings may be overvalued by 98.1%. Discover 50 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: MACOM Technology Solutions Holdings Price vs Earnings

For profitable companies, the P/E ratio is a useful quick check because it links what you pay per share to the earnings that business is currently generating. It gives you a simple way to compare how the market prices one dollar of earnings across different companies.

What counts as a “normal” or “fair” P/E usually reflects how the market views a company’s growth outlook and risk profile. Higher expected growth or lower perceived risk can justify a higher multiple, while slower expected growth or higher risk tends to line up with a lower one.

MACOM Technology Solutions Holdings currently trades on a P/E of about 102.99x. That is above the Semiconductor industry average P/E of about 42.78x and also above the peer average of about 36.54x. Simply Wall St’s “Fair Ratio” for MACOM is 39.54x, which is its proprietary estimate of what the P/E could be given factors such as earnings growth, profit margins, industry, market cap and identified risks.

This Fair Ratio can be more tailored than a simple peer or industry comparison because it attempts to adjust for company specific characteristics instead of treating all semiconductor names as identical. With MACOM’s current P/E of 102.99x versus a Fair Ratio of 39.54x, the shares screen as expensive on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your MACOM Technology Solutions Holdings Narrative

Earlier we mentioned that there is an even better way to think about valuation. On Simply Wall St this comes through Narratives, where you set out your story for MACOM Technology Solutions Holdings, link that story to a financial forecast for revenue, earnings and margins, and arrive at your own Fair Value that you can compare to the current price. This is all available within an easy tool on the Community page that updates as new earnings or news arrive. One investor might build a more optimistic MACOM view closer to a Fair Value of about US$265, while another might lean toward a more cautious Fair Value near US$160. Both can clearly see how their assumptions drive very different conclusions about whether the stock looks expensive or attractive to them.

For MACOM Technology Solutions Holdings, we will make it really easy for you with previews of two leading MACOM Technology Solutions Holdings Narratives:

These give you a clear Bull and Bear framing around the same stock, so you can see how different assumptions on growth, margins and P/E support can lead to very different views on value.

Fair value in this Bull case: US$261.14 per share

Current price premium or discount: roughly 14.8% above this Bull fair value, based on the latest close of about US$222.55 and the updated fair value of US$261.14

Assumed annual revenue growth: 16.82%

• Analysts backing this view see MACOM benefiting from AI, 5G and SATCOM demand across optical and RF products, with R&D and acquisitions helping support margins and earnings over time.
• They expect higher capacity and better efficiency from fabs such as RTP to help margins, while a broad mix of end markets like defense, industrial and space is seen as supporting earnings resilience.
• This camp is comfortable with a higher future P/E multiple to support a fair value of about US$261.14, tied to their assumptions on revenue growth, profit margins and discount rate.

Fair value in this Bear case: US$160.00 per share

Current price premium or discount: roughly 39.1% above this Bear fair value, based on the latest close of about US$222.55 and the Bear fair value of US$160.00

Assumed annual revenue growth: 14.65%

• Analysts with this more cautious stance focus on MACOM's exposure to specific optical ramps such as 800G and 1.6T, and the risk that large fab and R&D build outs could outgrow demand and weigh on margins.
• They highlight reliance on long cycle spending in data center, telecom, satellite and defense programs, where delays, cancellations or slower adoption could limit the uplift in revenue and free cash flow.
• To support a fair value of US$160.00, this group assumes solid revenue and margin improvement but a lower future P/E multiple, and they see the current share price as embedding expectations that are above their comfort zone.

Taken together, these Narratives frame a wide valuation range that stretches from about US$160.00 on the Bear side to roughly US$261.14 on the Bull side, versus a current share price around US$222.55. The useful part for you is not which camp is right, but which assumptions feel more realistic given your own view of MACOM's markets, execution and risk tolerance.

If you want to see how other investors are joining the dots between growth, margins and fair value for MACOM, Curious how numbers become stories that shape markets? Explore Community Narratives and look at how their forecasts line up with your own expectations.

Do you think there's more to the story for MACOM Technology Solutions Holdings? Head over to our Community to see what others are saying!

This 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.