Company Profile (excerpt from Reuters): Intel Corporation, incorporated on March 1, 1989, is engaged in designing and manufacturing products and technologies, such as the cloud. The Company’s segments are Client Computing Group (CCG), Data Center Group (DCG), Internet of Things Group (IOTG), Non-Volatile Memory Solutions Group (NSG), Intel Security Group (ISecG), Programmable Solutions Group (PSG), All Other and New Technology Group (NTG). The Company delivers computer, networking and communications platforms to a set of customers, including original equipment manufacturers (OEMs), original design manufacturers (ODMs), cloud and communications service providers, as well as industrial, communications and automotive equipment manufacturers. It offers platforms to integrate various components and technologies, including a microprocessor and chipset, a stand-alone System-on-Chip (SoC), or a multichip package. Its platforms are managed by additional hardware, software and services offered by Intel.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$222,860,087,779||Pass|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||1.51||Fail|
|3. Earnings Stability||Positive EPS for 10 years prior||Pass|
|4. Dividend Record||Dividend Payments for 10 years prior||Pass|
|5. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||67.70%||Pass|
|6. Moderate PEmg Ratio||PEmg < 20||16.61||Pass|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||3.18||Fail|
|Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.|
|1. Sufficiently Strong Financial Condition||Current Ratio > 1.5||1.51||Pass|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||2.53||Fail|
|3. Earnings Stability||Positive EPS for 5 years prior||Pass|
|4. Dividend Record||Currently Pays Dividend||Pass|
|5. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||5.48%|
|MG Value based on 3% Growth||$42.62|
|MG Value based on 0% Growth||$24.98|
|Market Implied Growth Rate||4.06%|
|% of Intrinsic Value||85.35%|
Intel Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.15 in 2014 to an estimated $2.94 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 4.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Intel Corporation revealed the company was trading above its Graham Number of $38.87. The company pays a dividend of $1.08 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.61, which was below the industry average of 36.27, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.85.
Intel Corporation performs fairly well in the ModernGraham grading system, scoring a B-.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||-$5.85|
|Number of Consecutive Years of Dividend Growth||3|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||9/1/2018|
|Total Current Assets||$29,590,000,000|
|Total Current Liabilities||$19,574,000,000|
|Shares Outstanding (Diluted Average)||4,648,000,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$4.56|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$2.94|
Other ModernGraham posts about the company
|Intel Corp Valuation – February 2018 $INTC|
|5 Overvalued Dow Components – July 2016|
|Intel Corporation Valuation – May 2016 $INTC|
|11 Best Stocks For Value Investors This Week – 11/21/15|
|Intel Corp Valuation – November 2015 Update $INTC|
Other ModernGraham posts about related companies
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner. Please be sure to review our detailed disclaimer.