Advanced Micro Devices Inc (AMD, Financial) recently experienced a daily gain of 2.46%, despite a 3-month loss of -9.53%. With an Earnings Per Share (EPS) loss of $0.02, the question arises: Is this stock fairly valued? This article aims to provide a thorough valuation analysis, shedding light on whether AMD's current market price accurately reflects its intrinsic worth. Read on for an in-depth exploration of Advanced Micro Devices' value.
A Snapshot of Advanced Micro Devices
Advanced Micro Devices designs a wide range of digital semiconductors for various markets, including PCs, gaming consoles, data centers, industrial, and automotive applications. With its traditional strength lying in central processing units (CPUs) and graphics processing units (GPUs), AMD has diversified its business by acquiring field-programmable gate array (FPGA) leader Xilinx in 2022. This move has augmented AMD's opportunities in key end markets, such as data centers and automotive.
Here's a breakdown of Advanced Micro Devices' income: 
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor derived from the company's past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to the GF Value calculation, Advanced Micro Devices (AMD, Financial) is believed to be fairly valued. With a current price of $108.32 per share and a market cap of $175 billion, AMD's stock is likely to yield long-term returns close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength can pose a high risk of permanent capital loss. It's crucial to assess a company's financial strength before deciding to purchase shares. Advanced Micro Devices has a cash-to-debt ratio of 2.2, ranking better than 51.06% of 897 companies in the Semiconductors industry. With an overall financial strength of 8 out of 10, Advanced Micro Devices demonstrates strong financial stability.
Here's a look at Advanced Micro Devices' debt and cash over the past years: 
Profitability and Growth
Companies that have consistently been profitable over the long term pose less risk for investors. Advanced Micro Devices has been profitable 5 times over the past 10 years. Despite a revenue of $21.90 billion and a Loss Per Share of $0.02 over the past twelve months, AMD's operating margin of -1.73% ranks worse than 71.54% of 938 companies in the Semiconductors industry. However, with a profitability rank of 7 out of 10, AMD's profitability is fair.
Growth is a critical factor in a company's valuation. Advanced Micro Devices' growth ranks better than 90.64% of 769 companies in the Semiconductors industry, with a 3-year average annual revenue growth rate of 35.7% and a 3-year average EBITDA growth rate of 76%.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Advanced Micro Devices' ROIC is -0.08, and its WACC is 15.34.
Here's a historical comparison of Advanced Micro Devices' ROIC vs WACC: 
Conclusion
In conclusion, Advanced Micro Devices' stock is believed to be fairly valued. The company's strong financial condition, fair profitability, and superior growth rank make it a compelling consideration for investors. To learn more about Advanced Micro Devices' stock, check out its 30-Year Financials here.
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