Leadership In Data Center Interconnect Continuing To Propel Inphi

It wasn’t that long ago that I last wrote on Inphi (IPHI), early April in fact, and the shares are up almost another 30% since then. The company did in fact produce the beat-and-raise quarter I expected, but the degree of the “raise” was startling even to me, as the company continues to benefit from physical layer upgrades in the data center.

How do you value Inphi? As is often the case, exceptional growth companies like Inphi don’t really work from a DCF standpoint and they break the models for the sort of multiples a “normal” company should get. You can turn to alternative approaches like peer multiples, but it’s tough to construct a peer group for Inphi – Nvidia (NVDA) and Silicon Labs (SLAB) would arguably belong in that group, but it’s a fairly short list.

You can also look at what the market has been willing to pay for similar growth in the past, or some combination of those approaches. It’s that latter method that I’m gravitating toward now; I won’t defend it as a particularly rigorous approach, but based upon what the market is willing to pay for the growth at companies like Nvidia and Silicon Labs now, and what it has paid for comparable growth in the past, you can get a fair value range of around $115 to $140 today.

Read more here:
Leadership In Data Center Interconnect Continuing To Propel Inphi