Qualcomm is a great company for both Defensive Investors and Enterprising Investors. The Defensive Investor only has one initial concern, which is the high PB ratio, and the Enterprising Investor has no initial concerns. Both investor types should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
The company has grown its EPSmg (normalized earnings) from $1.64 in 2010 to an estimated $3.93 for 2014. This demonstrates the company has achieved a strong level of growth, a fact supported by the company’s growth in regular EPS from an average of $1.55 for the period of 2005-07 to an average of $4.11 for the period of 2012-14. This strong level of demonstrated historical growth leads the ModernGraham valuation model to estimate a growth rate of 15% over the next 7-10 years. Though this is a high figure, and is actually the maximum growth rate the model will churn out, it is nearly half the growth rate the company has achieved during the historical period. As a result, the company could see a significant downturn in its growth and still achieve the ModernGraham growth estimate.
The model then utilizes Graham’s formula to return an estimate of intrinsic value of $151.38, which is well above the market’s current price of the company. Value investors are therefore encouraged to proceed with further research to determine whether Qualcomm Inc. is suitable for their own individual portfolios.