The numbers looked favorable for programmable-chip maker Altera (NASDAQ:ALTR) when it reported its fourth-quarter earnings after the bell on Monday. But the semiconductor industry is in the midst of an inventory glut, and Altera is no exception, no matter how it spins the facts.

Altera sales grew 10% in the fourth quarter to $240 million, and earnings per share came in at $0.15, three cents ahead of the Wall Street average. However, as Applied Materials (NASDAQ:AMAT), ASML Holdings (NASDAQ:ASML), and Lam Research (NASDAQ:LRCX) have all warned, high inventory levels among customers has choked off a lot of the growth in the semiconductor space.

Altera reported total inventory on hand (a figure that includes distributor inventory) of 4.2 months for the December quarter. Going by inventory turnover, a more conventional yardstick, the company's position has steadily worsened for three straight quarters. Company management, though, isn't exactly sounding the alarm bell.

Although acknowledging an industry-wide inventory glut, Altera management claims that its inventory is only slightly out of line. What's more, Altera management seems to want you to think that this high inventory is a good thing: The top brass classifies less than 20% of the inventory as "finished goods" and believes that that leaves it better-positioned to respond to consumer orders.

Even so, the company continually referred to inventory corrections as a leading cause of sluggish sales growth across its business lines. Given that the company is looking for only 1%-3% sequential growth for March, this looks to be an ongoing issue. If excess inventory is enough of a problem with the consumer to lead to lower orders, I'd argue that Altera's high inventory levels are a cause for concern.

Furthermore, although Altera shares have dropped by more than 25% over the past year, only by comparison to past valuation can Altera be called cheap. Trading at 25 times trailing earnings and nearly seven times sales, Altera is no screaming bargain. Even the price/earnings-to-growth ratio, the last haven of growth valuation, is high at 1.25, and it's anybody's guess whether Altera can actually post that 20% future growth.

To be fair, Altera is no doubt a quality semiconductor company. Gross margins are exceptional, the company continues to claim market share gains, and management is willing to put some of its considerable cash pile toward repurchasing shares. But everything has its price, and with a large volume of inventory looming overhead, I'd say the price is just too rich here.

Fool contributor Stephen Simpson holds a CFA. He has no ownership interest in any stocks mentioned.