On July 27, 2023, Micron Technology Inc (MU, Financial) experienced a daily gain of 5.06%, despite reporting a Loss Per Share of 2.68. This article aims to answer the fundamental question: Is Micron Technology (MU) significantly overvalued? To provide a comprehensive answer, we delve into a valuation analysis of the company, encouraging readers to follow through for an in-depth understanding.
A Snapshot of Micron Technology Inc (MU, Financial)
Micron Technology, a dominant player in the global semiconductor industry, is one of the largest suppliers of memory chips worldwide, providing DRAM and NAND products tailored for various computing devices. With a market cap of $77.5 billion and sales of $18.2 billion, the company's stock price stands at $70.79, significantly higher than the GF Value of $44.29, suggesting overvaluation.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the stock's ideal fair trading value.
Micron Technology (MU, Financial) appears to be significantly overvalued, according to GuruFocus Value calculation. The current price of $70.79 per share and the market cap of $77.5 billion suggests that Micron Technology stock is significantly overvalued. Thus, the long-term return of its stock is likely to be much lower than its future business growth.
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Financial Strength of Micron Technology
Investing in companies with robust financial strength reduces the risk of permanent loss. Micron Technology's cash-to-debt ratio stands at 0.75, ranking it lower than 69.63% of companies in the Semiconductors industry. The overall financial strength of Micron Technology is 6 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Micron Technology has been profitable 9 over the past 10 years. Despite its Loss Per Share of $2.68 over the past twelve months, the company achieved a revenue of $18.2 billion. However, its operating margin of -14.09% ranks worse than 84.42% of companies in the Semiconductors industry. Overall, Micron Technology's profitability is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. Micron Technology's 3-year average annual revenue growth rate is 10.2%, ranking it lower than 54.32% of companies in the Semiconductors industry. The 3-year average EBITDA growth rate is 10.9%, ranking it lower than 66.1% of companies in the industry.
Return on Invested Capital vs Weighted Average Cost of Capital
Comparing a company's return on invested capital (ROIC) with its weighted average cost of capital (WACC) provides insight into its profitability. For the past 12 months, Micron Technology's ROIC is -5.52, and its cost of capital is 9.89. This suggests that the company is not generating enough returns on the capital it has invested in its business.
Conclusion
In conclusion, Micron Technology Inc (MU, Financial) appears to be significantly overvalued. Despite having fair financial health and strong profitability, its growth ranks lower than 66.1% of companies in the Semiconductors industry. For more detailed financial data on Micron Technology, you can check out its 30-Year Financials here.
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