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Micron Technology Inc Valuation – March 2019 #MU

Company Profile (excerpt from Reuters): Micron Technology, Inc., incorporated on April 6, 1984, is engaged in semiconductor systems. The Company’s portfolio of memory technologies, including dynamic random-access memory (DRAM), negative-AND (NAND) Flash and NOR Flash are the basis for solid-state drives, modules, multi-chip packages and other system solutions. Its business segments include Compute and Networking Business Unit (CNBU), which includes memory products sold into compute, networking, graphics and cloud server markets; Mobile Business Unit (MBU), which includes memory products sold into smartphone, tablet and other mobile-device markets; Storage Business Unit (SBU), which includes memory products sold into enterprise, client, cloud and removable storage markets, and SBU also includes products sold to Intel through its Intel/Micron Flash Technology (IMFT) joint venture, and Embedded Business Unit (EBU), which includes memory products sold into automotive, industrial, connected home and consumer electronics markets. The Company’s memory solutions enable computing, consumer, enterprise storage, networking, mobile, embedded and automotive applications. The Company markets its products through internal sales force, independent sales representatives and distributors primarily to original equipment manufacturers (OEMs) and retailers located around the world.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MU – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $43,788,097,359 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.90 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 2068.37% Pass
6. Moderate PEmg Ratio PEmg < 20 6.67 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.32 Pass
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 2.90 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.86
MG Growth Estimate 15.00%
MG Value $225.48
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $84.92
MG Value based on 0% Growth $49.78
Market Implied Growth Rate -0.91%
Current Price $39.07
% of Intrinsic Value 17.33%

Micron Technology, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.6 in 2015 to an estimated $5.86 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.91% annual earnings loss 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 above the price.

At the time of valuation, further research into Micron Technology, Inc. revealed the company was trading below its Graham Number of $57.76. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 6.67, which was below the industry average of 35.5, 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 $4.41.

Micron Technology, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.41
Graham Number $57.76
PEmg 6.67
Current Ratio 2.90
PB Ratio 1.32
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 11/1/2018
Total Current Assets $15,039,000,000
Total Current Liabilities $5,189,000,000
Long-Term Debt $3,227,000,000
Total Assets $44,595,000,000
Intangible Assets $1,584,000,000
Total Liabilities $9,856,000,000
Shares Outstanding (Diluted Average) 1,174,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.33
Aug2018 $11.51
Aug2017 $4.41
Aug2016 -$0.27
Aug2015 $2.47
Aug2014 $2.54
Aug2013 $1.13
Aug2012 -$1.04
Aug2011 $0.17
Aug2010 $1.85
Aug2009 -$2.35
Aug2008 -$2.10
Aug2007 -$0.42
Aug2006 $0.57
Aug2005 $0.29
Aug2004 $0.24
Aug2003 -$2.11
Aug2002 -$1.51
Aug2001 -$1.05
Aug2000 $2.56
Aug1999 -$0.13

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.86
Aug2018 $5.46
Aug2017 $2.31
Aug2016 $1.16
Aug2015 $1.60
Aug2014 $1.09
Aug2013 $0.22
Aug2012 -$0.38
Aug2011 -$0.23
Aug2010 -$0.45
Aug2009 -$1.33
Aug2008 -$0.64
Aug2007 -$0.04
Aug2006 -$0.07
Aug2005 -$0.53
Aug2004 -$0.75
Aug2003 -$0.98

Recommended Reading:

Other ModernGraham posts about the company

Micron Technology Inc Valuation – May 2018 $MU
Micron Technology Inc Valuation – February 2017 $MU
Micron Technology Inc. Valuation – November 2015 Update $MU
30 Companies in the Spotlight This Week – 11/15/14
Micron Technology Inc. Annual Valuation – 2014 $MU

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Disclaimer:

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.

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