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Intel Corp (INTC) Quarterly Valuation – May 2014

500px-Intel-logo.svgBenjamin Graham taught that Intelligent Investors must 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 or by reviewing the 5 Highest Dividend Yields Among Undervalued Defensive Companies.  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 (INTC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Intel Corporation, incorporated in 1968, designs and manufactures integrated digital technology platforms. A platform consists of a microprocessor and chipset. The Company sells these platforms primarily to original equipment manufacturers (OEMs), original design manufacturers (ODMs), and industrial and communications equipment manufacturers in the computing and communications industries. 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. The Company also develops and sells software and services primarily focused on security and technology integration. In February 2014, M/A-COM Technology Solutions Holdings Inc announced that its subsidiary Mindspeed Technologies Inc completed the sale of assets of its wireless infrastructure business unit to Intel Corporation.

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 $25.82
MG Value $48.51
MG Opinion Undervalued
Value Based on 3% Growth $28.46
Value Based on 0% Growth $16.68
Market Implied Growth Rate 2.33%
NCAV -$0.67
PEmg 13.16
Current Ratio 2.25
PB Ratio 2.21

Balance Sheet – 3/29/2014

Current Assets $30,554,000,000
Current Liabilities $13,552,000,000
Total Debt $13,172,000,000
Total Assets $91,932,000,000
Intangible Assets $15,580,000,000
Total Liabilities $33,894,000,000
Outstanding Shares 4,972,000,000

Earnings Per Share

2014 (estimate) $1.74
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

Earnings Per Share – ModernGraham

2014 (estimate) $1.96
2013 $2.00
2012 $1.91
2011 $1.69
2010 $1.27
2009 $0.95

Dividend History

INTC Dividend Chart

INTC Dividend data by YCharts

Conclusion:

Intel Corp is an outstanding company for both Defensive Investors and Enterprising Investors to consider.  The company passes all of the requirements of both investor types.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and its competitors by exploring the ModernGraham Valuation Index.  From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.27 in 2010 to an estimated $1.96 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of only 2.33% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

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 in any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

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

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