Intel Corp (INTC, Financial) has seen a daily gain of 3.41% and a three-month gain of 17.56%. Despite a Loss Per Share of 0.22, the question remains: is the stock modestly overvalued? This article delves into a comprehensive valuation analysis, inviting readers to explore the financial health, profitability, and growth of Intel (INTC).
Company Introduction
Intel Corp (INTC, Financial), a leading digital chipmaker, designs and manufactures microprocessors for the global personal computer and data center markets. Pioneering the x86 architecture for microprocessors and Moore's law for advances in semiconductor manufacturing, Intel remains the market leader in central processing units for both PC and server end markets. The company has also expanded into new sectors such as communications infrastructure, automotive, and the Internet of Things, leveraging its chip manufacturing capabilities into an outsourced foundry model.
Comparing the stock price of $36.34 with the GF Value of $32.11, it appears that Intel (INTC, Financial) might be modestly overvalued. This valuation analysis will offer a more in-depth exploration of the company's intrinsic value.
Understanding the GF Value
The GF Value is a proprietary valuation method that estimates a stock's intrinsic value based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on the summary page provides an overview of the stock's fair trading value.
Intel's stock seems modestly overvalued according to this method, with a market cap of $152.20 billion. Given its relative overvaluation, the long-term return of Intel's stock is likely to be lower than its business growth.
Exploring Financial Strength
Investing in companies with low financial strength can result in permanent capital loss. Therefore, a company's financial strength should be carefully reviewed before deciding to buy shares. Intel's cash-to-debt ratio of 0.5 ranks worse than 78.71% of 897 companies in the Semiconductors industry, suggesting a fair balance sheet.
Profitability and Growth
Consistent profitability over the long term offers less risk for investors. Intel has been profitable 10 out of the past 10 years, with a revenue of $54 billion over the past twelve months. However, its operating margin of -4.44% ranks worse than 75.48% of 938 companies in the Semiconductors industry.
Growth is a crucial factor in a company's valuation. Intel's average annual revenue growth is -1.7%, which ranks worse than 78.87% of 866 companies in the Semiconductors industry. The 3-year average EBITDA growth is -13.2%, ranking worse than 88.04% of 769 companies in the Semiconductors industry.
ROIC vs WACC
Another way to determine a company's profitability is by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Intel's ROIC for the past 12 months is -0.55, and its cost of capital is 8.77, indicating that the company is not creating value for shareholders.
Conclusion
Overall, Intel (INTC, Financial) stock appears to be modestly overvalued. Despite fair financial condition and strong profitability, the company's growth ranks worse than most companies in the Semiconductors industry. For more details on Intel's financials, you can check out its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, check out GuruFocus High Quality Low Capex Screener.
