As of July 23, 2023, Qualcomm Inc (QCOM, Financial) has seen a promising 3.31% gain, with its stock price reaching $124.72. With a market cap of $138.9 billion and an Earnings Per Share (EPS) of $9.32, this leading wireless technology company presents an intriguing prospect for value investors. According to GuruFocus, the GF Value of Qualcomm stands at $168.45, suggesting that the stock is modestly undervalued.
Qualcomm Inc (QCOM, Financial) has made its mark in the tech industry by developing and licensing wireless technology, designing chips for smartphones, and supplying leading-edge processors to almost every premium handset maker. Its key patents revolve around CDMA and OFDMA technologies, which form the backbone of all 3G, 4G, and 5G networks. In addition to its stronghold in the smartphone sector, Qualcomm also sells RF-front end modules and chips for automotive and Internet of Things markets.
GF Value Line: A Key Indicator of Qualcomm's Value
The GF Value is a unique calculation that estimates the fair value at which a stock should ideally be traded. It considers historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. If a stock's price significantly exceeds the GF Value Line, it is deemed overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price and market cap, Qualcomm (QCOM, Financial) appears to be modestly undervalued.
Given its undervalued status, the long-term return of Qualcomm's stock is likely to surpass its business growth.
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Financial Strength: A Closer Look
Investing in companies with low financial strength can result in permanent capital loss. Therefore, investors must carefully review a company's financial strength before purchasing shares. Qualcomm's cash-to-debt ratio of 0.42 ranks lower than 80.82% of companies in the Semiconductors industry, suggesting a fair balance sheet.
Profitability: A Safe Investment?
Companies with consistent profitability over the long term are generally safer investments. Qualcomm has been profitable 9 out of the past 10 years, with a revenue of $41.1 billion and an operating margin of 30.91%, ranking better than 93.06% of companies in the Semiconductors industry.
Growth: The Key to Valuation
Growth is a crucial factor in a company's valuation. Qualcomm's 3-year average annual revenue growth is 25%, which ranks better than 77.79% of companies in the Semiconductors industry. The 3-year average EBITDA growth rate is 24.9%, ranking better than 52.92% of companies in the industry.
ROIC vs WACC: Evaluating Profitability
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) can provide insights into its profitability. Qualcomm's ROIC was 31.4 over the past 12 months, while its WACC came in at 10.31, indicating that the company is creating value for shareholders.
Conclusion
In summary, Qualcomm (QCOM, Financial) appears to be a modestly undervalued stock with fair financial condition and strong profitability. Its growth ranks better than 52.92% of companies in the Semiconductors industry. To learn more about Qualcomm stock, check out its 30-Year Financials here.
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