On the surface, Xilinx. Inc. should attract both the Defensive Investor and the Enterprising Investor. The only requirement of either investor type which the company fails to satisfy is the Defensive Investor’s requirement of a low PB ratio. As a result, both types of value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
The next step is to consider the company’s intrinsic value through an analysis of the company’s earnings growth and a comparison to the market’s implied estimate of further earnings growth. In this case, the company has grown its EPSmg (normalized earnings) from $1.64 in 2011 to only an estimated $2.16 for 2015. This low level of demonstrated growth does not support the market’s implied estimate for earnings growth of 5.73% over the next 7-10 years. The ModernGraham valuation model therefore returns an estimate of intrinsic value falling below the current price, indicating the company is overvalued at the present time.
Be sure to read previous ModernGraham valuations of Xilinx Inc. for better perspective!