Qualcomm Inc (QCOM, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $109.09, Qualcomm Inc has witnessed a surge of 2.77% over a period, marked against a three-month change of -7.06%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Qualcomm Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Qualcomm Inc's GF Score components are as follows:
- 1. Financial strength rank: 7/10
- 2. Profitability rank: 9/10
- 3. Growth rank: 9/10
- 4. GF Value rank: 10/10
- 5. Momentum rank: 7/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability and growth, and a slightly lower rank in financial strength, GuruFocus assigned Qualcomm Inc the GF Score of 94 out of 100, which signals the highest outperformance potential.
Understanding Qualcomm Inc's Business
Qualcomm Inc, with a market cap of $121.74 billion, is a leading player in the wireless technology and smartphone chip design industry. The company's key patents revolve around CDMA and OFDMA technologies, which are standards in wireless communications that are the backbone of all 3G, 4G, and 5G networks. Qualcomm's IP is licensed by virtually all wireless device makers. The firm is also the world's largest wireless chip vendor, supplying nearly every premier handset maker with leading-edge processors. Qualcomm also sells RF-front end modules into smartphones, as well as chips into automotive and Internet of Things markets.
Financial Strength Breakdown
According to the Financial Strength rating, Qualcomm Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Qualcomm Inc stands impressively at 16.67, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.4, Qualcomm Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Qualcomm Inc's impressive standing among its peers in generating profit. Furthermore, Qualcomm's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2019: 64.57; 2020: 60.67; 2021: 57.51; 2022: 57.84; 2023: 71.61; . This trend underscores the company's growing proficiency in transforming revenue into profit.
Growth Rank Breakdown
Ranked highly in Growth, Qualcomm Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 25%, which outperforms better than 77.4% of 863 companies in the Semiconductors industry. Moreover, Qualcomm Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 24.9, and the rate over the past five years is 43.9. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Qualcomm Inc's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the importance of considering a company's financial health and growth potential when making investment decisions. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
