Tuesday, 21 January 2014

Analysis of Intel 2014

An American chip and hardware producer

Company: Intel

Business: An American mainly hardware producer with focus on processors with "intel inside" being a slogan that everyone knows what it means as well as the quality that stands behind that statement. They are divided into five segments: PC Client Group (which is the processor part), Data Center Group (which is server, workstations and storage platforms), Other Intel Architectures (which include tablet, smartphone etc.), Software and Services (mainly being McAfee that they bought some time ago) and the final one is All Other (which has to do with non-volatile memory solutions).

Active: Globally working with all technology producers. Intel themselves are active mainly in the US and EU.

P/E: 13.6

A previous analysis was made of Intel and that can be found here.

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Intel has now started to be slightly too high for me with 13.6 and the P/B is also too high 2.25 which leads to that Graham sees no interest in stepping into Intel today. They have excellent earnings to sales of 18% and the ROE is also pretty good with 16.5%. The book to debt like many American companies are great with a ratio of 1.7. In the last six years they have had a yearly growth of 5.8% which is very good! However lately it has been dropping and the major jump up in revenue and profit took place back in 2010/2011. Still the growth rate gives us a motivated P/E of 16 to 20 which means Intel is still slightly undervalued on the market. They spend a big chunk of money on R&D since it is now as high as 110% of their earnings! They pay a fully acceptable dividend of 3.5% which represents 48% of their earnings so they should be able to keep it up.

Conclusion: Graham says no to this investment and I say the same. Today I find it less of interest to step in as a new investor in Intel but I also see no obvious reason for why one should sell ones share if one has them like I do. In the end... The P/E is still ok, the E/S is excellent, ROE is great and book to debt also. The growth is slowing and even decreasing lately but they still pay fully acceptable dividends so I am still in!

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