NXP Semiconductors NV (NXPI, Financial) experienced a daily loss of 3.67%, yet it still managed to gain 25.68% over the last three months. With Earnings Per Share (EPS) standing at 10.57, the question arises: Is the stock fairly valued? In this article, we delve into the valuation analysis of NXP Semiconductors NV (NXPI), providing you with comprehensive insights into the company's financial standing.
Overview of NXP Semiconductors NV
NXP Semiconductors NV is a prominent supplier of high-performance mixed-signal products. The company, which acquired Freescale Semiconductor in 2015, now holds substantial market share in the automotive industry, supplying microcontrollers and analog chips for various automotive applications. NXP Semiconductors NV also caters to other sectors, including industrial and Internet of Things, mobile, and communications infrastructure. As of August 12, 2023, the company's stock price stands at $204.2, with a market cap of $52.60 billion.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides a snapshot of the stock's ideal fair trading value. If the stock price is significantly above or below the GF Value Line, it may be overvalued or undervalued, respectively.
According to our analysis, NXP Semiconductors NV (NXPI, Financial) appears to be fairly valued. The GF Value estimates the stock's fair value at $224.06, considering historical multiples, the company's past performance, and future business prospects. As a result, the long-term return of the stock is likely to mirror its business growth rate.
Financial Strength Analysis
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. A good starting point for understanding a company's financial strength is looking at the cash-to-debt ratio and interest coverage. NXP Semiconductors NV has a cash-to-debt ratio of 0.35, which is lower than 83.19% of companies in the Semiconductors industry. Despite this, the company's overall financial strength ranks at 6 out of 10, indicating fair financial health.
Profitability and Growth
A company's profitability is a significant factor in assessing investment risk. NXP Semiconductors NV has been profitable 10 over the past 10 years, with an operating margin of 28.42%, ranking better than 91.98% of companies in the Semiconductors industry. The company's growth is also impressive, with an average annual revenue growth of 17.2%, ranking better than 63.67% of companies in the Semiconductors industry.
ROIC vs WACC
Another method of determining a company's profitability is by comparing its return on invested capital (ROIC) to the weighted average cost of capital (WACC). When ROIC is higher than WACC, it implies the company is creating value for shareholders. For the past 12 months, NXP Semiconductors NV's ROIC stands at 17.27, and its cost of capital is 9.75.
Conclusion
In conclusion, NXP Semiconductors NV (NXPI, Financial) appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 55.06% of companies in the Semiconductors industry. To learn more about NXP Semiconductors NV stock, you can check out its 30-Year Financials here.
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