Intel Corp (INTC) Quarterly Valuation

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People like to talk about where Intel fits in the tech world today, often basing their investment decision on whether they think the company will be able to keep up with many of its competitors rather than on whether the financial statements indicate a value opportunity.  Intelligent Investors know to do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Intel Corp. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Intel Corporation designs and manufactures integrated digital technology platforms. A platform consists of a microprocessor and chipset. The Company’s platforms are used in a range of applications, such as personal computers (PCs) (including Ultrabook systems), data centers, tablets, smartphones, automobiles, automated factory systems and medical devices. In February 2013, it acquired ProFUSION-Comercio e Prestacao de Servicos em Tecnologia da Informacao Ltda. In April 2013, Intel Corp acquired Aepona Ltd. Effective July 16, 2013, Intel Corp acquired Omek Interactive Ltd. Effective August 15, 2013, Intel Corp acquired Fujitsu Semiconductor Wireless Products Inc, from Fujitsu Semiconductor Ltd, a wholly owned subsidiary of Fujitsu Ltd. Effective November 8, 2013, Intel Corp acquired Kno Inc, a developer of educational software.

INTC Chart

INTC data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 7/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – PASS
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $24.76
MG Value $76.82
MG Opinion Undervalued
Value Based on 3% Growth $28.93
Value Based on 0% Growth $16.96
Market Implied Growth Rate 1.95%
NCAV -$0.41
PEmg 12.41
Current Ratio 2.36
PB Ratio 2.11

Balance Sheet – 12/28/2013

Current Assets $32,084,000,000
Current Liabilities $13,568,000,000
Total Debt $13,165,000,000
Total Assets $92,358,000,000
Intangible Assets $15,663,000,000
Total Liabilities $34,102,000,000
Outstanding Shares 4,967,000,000

Earnings Per Share

2013 $1.89
2012 $2.13
2011 $2.39
2010 $2.01
2009 $0.77
2008 $0.92
2007 $1.18
2006 $0.86
2005 $1.40
2004 $1.16
2003 $0.85
2002 $0.46

Earnings Per Share – ModernGraham 

2013 $2.00
2012 $1.91
2011 $1.69
2010 $1.27
2009 $0.95
2008 $1.06

Dividend History

INTC Dividend Chart

INTC Dividend data by YCharts

Conclusion:

Intel Corp. fares extremely well in the ModernGraham requirements, passing every test of both the Defensive Investor and the Enterprising Investor.  This is a company that appears to present low risk of financial strife and may present relative safety of principal.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research into the opportunity.  An example of further research would be to look into some competitors, such as by a review of ModernGraham’s valuation of Hewlett-Packard Company (HPQ) and ModernGraham’s valuation of Texas Instruments (TXN).  From a valuation standpoint, the company looks very strong, having grown its EPSmg (normalized earnings) from $0.95 in 2009 to $2.00 for 2013.  This level of growth easily supports the market’s implied estimate for growth of 1.95%, and the ModernGraham valuation model returns an intrinsic value that exceeds the current market price.  Therefore, the company appears to be undervalued at the current time.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Intel Corp (INTC)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Intel Corp (INTC) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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3 comments for “Intel Corp (INTC) Quarterly Valuation

  1. Rodney P. Dempsey
    February 21, 2014 at 3:13 am

    I bought 100 shares of Intel on your Modern Graham recommendation. This is the first, but not the last purchase I will make, based on your screens. I really like your straightforward analysis.

  2. George Tsai
    April 2, 2014 at 4:54 pm

    I have held Intel for many years now and have seen the stock price being flat for most of that time. They have missed the boat on several occasions. But it is a great company for a patient investor. They are working on cutting edge technology that is becoming more fully integrated in all aspects of our lives. Apple’s pioneering of the Iphone is just a step in a long journey. In the next decade, we will not be talking about smart phones or smart watches. We will have full computing capabilities in the palm of our hands or as jewelry to wear. Imaging your most powerful laptop or desktop in such a small package. Everything you can do now with hand helds, plus all the computational capabilities of a more sophisticated computer. One small device that integrates TV, email, banking, internet, business software, scientific and engineering capabilities, home automation, communication, that fits on your keychain! And Intel will be at the heart of it.

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