Intel Corp (INTC, Financial) has experienced a daily loss of 4.34% and a 3-month gain of 0.26%. The company also reported a Loss Per Share of 0.22. Is the stock modestly overvalued? This article aims to provide an in-depth analysis of Intel's valuation. Keep reading to gain valuable insights into the company's financial health and intrinsic value.
Company Overview
Intel Corp (INTC, Financial) is a renowned digital chipmaker, primarily involved in designing and manufacturing microprocessors for global personal computer and data center markets. Intel has been a pioneer in the x86 architecture for microprocessors and has led the charge in advancing semiconductor manufacturing under Moore's law. The company holds a significant market share in central processing units in both PC and server end markets. Moreover, Intel has been expanding into new adjacencies like communications infrastructure, automotive, and the Internet of Things. The company also plans to leverage its chip manufacturing capabilities into an outsourced foundry model.
Intel's current stock price is $36.34, with a market cap of $149.20 billion. The GF Value, an estimation of fair value, is $31.96, suggesting that the stock might be modestly overvalued.
Understanding 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 based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
According to our valuation method, Intel (INTC, Financial) is estimated to be modestly overvalued. This implies that the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Intel's cash-to-debt ratio of 0.5 ranks worse than 79.05% of 902 companies in the Semiconductors industry, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies is generally less risky, especially those that have demonstrated consistent profitability over the long term. Intel has been profitable 10 times over the past 10 years, indicating strong profitability. However, Intel's growth ranks worse than 87.84% of 773 companies in the Semiconductors industry, indicating a need for improvement.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it implies the company is creating value for shareholders. However, Intel's ROIC of -0.55 is lower than its WACC of 9, suggesting the company needs to improve its profitability.
Conclusion
Overall, Intel (INTC, Financial) stock is estimated to be modestly overvalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks lower than most companies in the Semiconductors industry. To learn more about Intel stock, you can check out its 30-Year Financials here.
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