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Is Micron Technology a Value Stock?

A nearly 8% gain on Friday requires a closer look

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Nov 21, 2021
Summary
  • The stock trades with a low price-earnings ratio.
  • The company has decent earnings.
  • It also pays a dividend.
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The semiconductor stock is blasting back upward. Micron Technology Inc. (

MU, Financial) had a nearly 8% gain Friday. An Evercore analyst said the stock looked good and buyers came back out of the woodwork with wallets open. The big DRAM manufacturer had been downtrending so steadily since April that the old growth equity might now qualify as a value stock.

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For example, there’s the low price-earnings ratio of 16.12. That’s well below a similar chipmaker such as Taiwan Semiconductor (

TSM, Financial), which sits with a price-earnings of 28. It’s also low when compared to the price-earnings ratio of the S&P 500 as measured by Shiller, right now at 39.64, just below the 1999 all-time high of 44.

Micron also trades with the relatively low price-book ratio of 2.11. Note that this is much lower than Taiwan Semiconductor’s 7.72 price-book metric. And then there’s the comparison to the Shiller price-book measure for the S&P 500, which comes in these days at a remarkable 4.84, the highest since 1999’s 5.1.

Does the company pay a dividend? That’s one of the questions required of a value stock, as elucidated by Benjamin Graham in his classic works on the subject. The answer in the case of Micron is yes, it does. The dividend yield was 0.48% at Friday’s closing price. It’s a small dividend, but it still counts.

What about the earnings record? Earnings per share this year are up 116.20%. Over the past five years, the earnings per share growth rate is 84.30%. Analysts think earnings will be decent enough in the coming 12 months that the “forward” price-earnings ratio is a 7.69 – an amazing figure for a growth stock in the tech sector.

The GuruFocus summary of Micron’s financials shows five good signs, two medium warning signs and one severe warning sign.

Whatever the future holds for the stock market as a whole or for the semiconductor chipmakers as a whole, these are the types of metrics typically associated with, well, value. That Micron found many more buyers than sellers this week and took off above a previously declining trend line indicates that some serious investors may be taking notice of it.

Note that huge average daily volume of 16.88 million shares on the New York Stock Exchange makes it possible for large institutional investors to participate. Big money should not have a problem getting in or out of Micron with that kind of liquidity -- with the caveat that certain trading sessions may be less ordinary than other sessions, of course.

Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Not investment advice. For educational purposes only. Always consult with a registered investment advisor before making any decisions.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
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