Price ratio

If we look at Intel’s (INTC) price ratios, the stock looks reasonably priced, even at its 17-year high of $45, and many analysts seem to believe that Intel is a cheap stock for investors who want to bet on AI (artificial intelligence).

What Intel’s Price Ratio Says about Its Valuation

Forward price-to-earnings ratio

Intel’s PE (price-to-earnings) ratio tells us the amount that investors are willing to pay per dollar of EPS (earnings per share). The forward PE ratio is based on the analysts’ EPS estimates for the next four quarters.

On November 22, 2017, Intel’s forward PE ratio stood at 13.8x, which is lower than Advanced Micro Devices’ (AMD) 32.3x, NVIDIA’s (NVDA) 45.7x, and Broadcom’s (AVGO) 15.4x. Intel’s stock price is low compared with its earnings because its earnings growth rate is lower than those of its peers.

In fiscal 3Q17, Intel’s EPS rose 26% YoY (year-over-year), while AMD’s EPS rose 233% YoY, NVIDIA’s EPS rose 41% YoY, and Broadcom’s EPS rose 42% YoY. Remember, a stock’s price is influenced by the growth rate.

Forward price-to-sales ratio

Intel’s PS (price-to-sales) ratio tells us the amount that investors are willing to pay for every dollar of the company’s sales. A forward PS ratio is based on the analysts’ revenue estimates for the next four quarters.

On November 22, 2017, Intel’s forward PS ratio stood at 3.37x, which is higher than AMD’s 2.1x but lower than NVIDIA’s 13.8x and Broadcom’s 6.4x. Intel’s stock is reasonably priced compared with its revenues. NVIDIA has a high PS ratio because it’s in the middle of a high growth cycle driven by the AI (artificial intelligence) revolution.

Price-to-FCF

Intel’s price-to-FCF (free cash flow) ratio tells us the amount that investors are willing to pay for every dollar of FCF.

On November 22, 2017, Intel’s price-to-FCF ratio stood at 30.9x, which is lower than NVIDIA’s 56.4x and Broadcom’s 33.08x. AMD has a negative price-to-FCF of 50.5x because its low profits and high-interest burden have put pressure on its cash flow.

The low price-to-FCF shows that Intel stock is undervalued compared with its FCF. This could mean that overall, the stock is undervalued when compared with its earnings and free cash flow but fairly valued when compared with its sales.

Latest articles

Marathon Petroleum (MPC) stock has been tumbling in Q3, driven by geopolitical tensions, oil price uncertainty, and weaker refining conditions.

This week, AT&T CEO Randall Stephenson noted that AT&T (T) is on track to reduce its leverage multiple to about 2.5x by the end of this year.

Jeff Bezos announced that Amazon had placed an order of 100,000 electric delivery vans from Michigan-based startup Rivian.

Bad news on the trade war front appears to have led to a fall in the broader US equity markets today. Cannabis ETFs were also trading in the red.

Energy Transfer (ET) stock has recovered in the last two trading sessions after investors hammered it on its plans to acquire SemGroup (SEMG).

Software-as-a-service company Datadog (DDOG) made a smashing debut on Wall Street yesterday. After its IPO, DDOG's shares surged 40% in intraday trading.