Micron Technology Inc (MU, Financial) has seen a daily gain of 3.04% and a 3-month loss of -11.21%. Despite its Loss Per Share of 2.68, the question remains: Is the stock significantly overvalued? This article delves into a comprehensive analysis of the company's valuation. Read on to explore the financial health and intrinsic value of Micron Technology.
Company Overview
As one of the largest semiconductor companies globally, Micron Technology Inc (MU, Financial) specializes in memory and storage chips. The company's primary revenue stream comes from dynamic random access memory (DRAM), with minor exposure to NAND flash chips. Micron Technology serves a diverse customer base, providing chips for data centers, mobile phones, consumer electronics, and industrial and automotive applications. With a current stock price of $65.66 per share and a market cap of $71.90 billion, the company's valuation compared to its GF Value is in focus.
Understanding GF Value
The GF Value is a proprietary 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 an overview of the stock's fair trading value. If the stock price significantly exceeds the GF Value Line, it is 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.
Micron Technology (MU, Financial) appears to be significantly overvalued based on the GuruFocus Value calculation. As the stock price of $65.66 per share significantly exceeds the GF Value Line, the long-term return of Micron Technology's stock is likely to be much lower than its future business growth.
Financial Strength Analysis
Investing in companies with poor financial strength poses a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to invest. Micron Technology's cash-to-debt ratio of 0.75 is worse than 71.53% of 885 companies in the Semiconductors industry. GuruFocus ranks Micron Technology's overall financial strength at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Companies that have been consistently profitable offer less risk for investors. Micron Technology has been profitable 9 out of the past 10 years. Over the past twelve months, the company had a revenue of $18.20 billion and a Loss Per Share of $2.68. Its operating margin is -14.09%, ranking worse than 82.26% of 936 companies in the Semiconductors industry. Overall, Micron Technology's profitability is ranked 8 out of 10, indicating strong profitability.
Growth is a critical factor in a company's valuation. The 3-year average annual revenue growth rate of Micron Technology is 10.2%, ranking worse than 54.8% of 865 companies in the Semiconductors industry. The 3-year average EBITDA growth rate is 10.9%, ranking worse than 66.15% of 768 companies in the Semiconductors industry.
ROIC Vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can determine its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Micron Technology's ROIC is -5.52, and its cost of capital is 10.4.
Conclusion
In conclusion, Micron Technology (MU, Financial) appears to be significantly overvalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 66.15% of 768 companies in the Semiconductors industry. To learn more about Micron Technology's stock, check out its 30-Year Financials here.
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