Long-established in the Semiconductors industry, Intel Corp (INTC, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 0.2%, juxtaposed with a three-month change of 21.98%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Intel Corp.
Understanding 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.
- 1. Financial strength rank: 5/10
- 2. Profitability rank: 8/10
- 3. Growth rank: 4/10
- 4. GF Value rank: 1/10
- 5. Momentum rank: 9/10
Based on the above method, GuruFocus assigned Intel Corp the GF Score of 69 out of 100, which signals poor future outperformance potential.
Intel Corp: A Snapshot of Its Business Operations
Intel Corp, with a market cap of $159.5 billion, is a leading digital chipmaker, focused on the design and manufacturing of microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors and was the prime proponent of Moore's law for advances in semiconductor manufacturing. Intel remains the market share leader in central processing units in both the PC and server end markets. Intel has also been expanding into new adjacencies, such as communications infrastructure, automotive, and the Internet of Things. Further, Intel expects to leverage its chip manufacturing capabilities into an outsourced foundry model where it constructs chips for others.
Financial Strength Breakdown
Intel Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 633 companies in the Semiconductors industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 2.04, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81.
Additionally, the company's low cash-to-debt ratio at 0.5 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 5.52, which is above Joel Tillinghast's warning level of 4 and is worse than 84.02% of 657 companies in the Semiconductors industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Growth Prospects
A lack of significant growth is another area where Intel Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -1.7 per year over the past three years, which underperforms worse than 79.14% of 863 companies in the Semiconductors industry. Stagnating revenues may pose concerns in a fast-evolving market.
Over the past five years, Intel Corp has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -13.2, while the five-year growth rate is at -0.3. These figures underscore potential challenges in the company's profitability.
Lastly, Intel Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights Intel Corp's unparalleled position for potential underperformance. While the company has a rich history and a strong market presence, these indicators suggest that it may struggle to maintain its historical performance. As value investors, it's crucial to consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
