Intel Corp (INTC, Financial) has experienced a daily loss of -3.18%, with a 3-month gain of 13.19%. The company's Loss Per Share stands at 0.22. But, is the stock fairly valued? This article aims to answer this question through a comprehensive valuation analysis. We encourage you to read on to understand the intrinsic value of Intel (INTC).
Company Overview
Intel Corp (INTC, Financial) is the world's largest logic chipmaker, primarily designing and manufacturing microprocessors for the global personal computer and data center markets. The company has been instrumental in advancing semiconductor manufacturing and has seen significant growth in its server processor business, thanks to the shift to cloud computing. Intel has also been diversifying into new areas such as the Internet of Things, artificial intelligence, and automotive as personal computer market stagnates.
Currently, Intel's stock price stands at $32.47, which is in line with its GF Value, estimated to be $32.2. Thus, the stock appears to be fairly valued. Below is Intel's income breakdown:
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates.
According to the GF Value calculation, Intel (INTC, Financial) appears to be fairly valued. This assessment is based on the historical trading multiples at which the stock has traded, past business growth, and analyst estimates of future business performance. If the stock price is significantly above the GF Value Line, it is considered 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. With a current market cap of $136 billion, Intel's stock appears to be fairly valued.
Because Intel is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before investing. Looking at Intel's cash-to-debt ratio, which stands at 0.5, it's clear that Intel's financial strength is worse than 78.15% of companies in the Semiconductors industry.
Here is a snapshot of Intel's debt and cash over the past years:
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Intel has been profitable 10 years over the past 10 years. However, its operating margin of -4.44% is worse than 76.77% of companies in the Semiconductors industry. Overall, GuruFocus ranks Intel's profitability as strong.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. However, the growth of Intel is worse than 78.89% of companies in the Semiconductors industry, with a 3-year average annual revenue growth of -1.7% and a 3-year average EBITDA growth rate of -13.2%.
ROIC vs WACC
Another way to determine a company's profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Intel's ROIC stands at -0.55, and its cost of capital is 8.84.
Below is the historical ROIC vs WACC comparison of Intel:
Conclusion
In conclusion, the stock of Intel Corp (INTC, Financial) gives every indication of being fairly valued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 87.66% of companies in the Semiconductors industry. For more information about Intel stock, you can check out its 30-Year Financials here.
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