Saturday, January 23, 2016

Analysis of Intel 2016


Intel, an American processor producer

Company: Intel 

ISIN US4581401001 | WKN 855681 

Business: An American hardware producer (mainly processor). They have now decreased their segments to five and those are: Client Computing Group (which is the processor part and now also contains the mobile part), Data Center Group (which is server, workstations and storage platforms), Internet of Things Group (platforms designed for embedded market segments), Software and Services (mainly being McAfee) and the final one is All Other (which mainly has to do with non-volatile memory solutions). 

Active: Products are sold world wide. 

P/E: 12.6


Here you can find the previous analysis of Intel 2015.

contrarian values of P/E, P/B, ROE as well as dividend for Intel

The P/E of Intel is excellent with 12.6 and the P/B is ok with 2.4 but still it gives us a no go from Graham. The earnings to sales are looking good with 21% and the ROE is also great with 18.7%. The book to debt ratio is very good with 1.5.
In the last five years they have had an awful yearly revenue growth rate of only 0.6% which then gives us a motivated P/E of 8 to 10 which means that Intel is today slightly overvalued on the market.
Their intention is to stay on top and to grind down the competition and for this reason they spend 101% of their earnings into R&D. I do find that a lot!
They pay a fully acceptable dividend of 3.2% which correspond to 41% of their earnings so there should be little risk of a decrease for the time being.

Conclusion: Graham says no and I say yes. The P/E, P/B, ROE and dividend are all good. The companies business is solid. The market consider them to be in trouble and yet they keep pushing out 10+ billions in earnings year after year. If one just stops to think about it in real values then Intel could for those 10+ billions each year buy companies generating 10+ billions in revenue and 0.5 to 1 billion in sales. With earnings and a stable cash flow you can do a lot of things.... a lot, but that does not mean that you have to do it. I will remain as shareholder in Intel.

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