Qualcomm Inc (QCOM, Financial) saw a daily gain of 3.25% and an Earnings Per Share (EPS) (EPS) of 7.63. Despite a 3-month loss of -8.13%, the question arises: is the stock modestly undervalued? This article provides a comprehensive valuation analysis of Qualcomm (QCOM), inviting the reader to delve into the financials of this tech giant.
Company Overview
Qualcomm Inc (QCOM, Financial), a leader in wireless technology, designs chips for smartphones and licenses its technology worldwide. The company's key patents revolve around CDMA and OFDMA technologies, which are the backbone of all 3G, 4G, and 5G networks. With a market cap of $122.30 billion and a current share price of $109.59, Qualcomm's stock appears to be modestly undervalued compared to its GF Value of $152.29.
Understanding GF Value
The GF Value is a unique measure that provides an estimation of a stock's fair value. It considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If a stock's price is significantly above 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.
Qualcomm's current price of $109.59 per share suggests that the stock is modestly undervalued. This implies that the long-term return of Qualcomm's stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Qualcomm's cash-to-debt ratio of 0.56, which is worse than 76.85% of companies in the Semiconductors industry, calls for a careful review of its financial strength.
Profitability and Growth
Companies with high profitability and consistent growth are generally safer investments. Qualcomm has been profitable 9 out of the past 10 years, with an operating margin of 28.77%, ranking better than 92.54% of companies in the Semiconductors industry. Moreover, Qualcomm's 3-year average revenue growth rate is better than 77.4% of companies in the industry, and its 3-year average EBITDA growth rate is 24.9%.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to evaluate its profitability. Over the past 12 months, Qualcomm's ROIC was 27.25, while its WACC came in at 10.34, indicating that the company is creating value for shareholders.
Conclusion
Given its financial condition and strong profitability, Qualcomm (QCOM, Financial) stock appears to be modestly undervalued. With a growth rate that ranks better than 53.26% of companies in the Semiconductors industry, Qualcomm seems poised for promising future returns. For more details on Qualcomm's financials, check out its 30-Year Financials here.
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