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What Intel’s Low Forward Price-to-Earnings Ratio Tells Investors

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Intel’s earnings

Intel (INTC) is the largest R&D (research and development) spender in the semiconductor industry. The company has a higher operating expense ratio of 32.4% compared to Advanced Micro Devices’ (AMD) 27.0% and NVIDIA’s (NVDA) 20.2%. Intel’s EPS growth is slower than its rivals.

Intel’s EPS rose 28.0% YoY (year-over-year) to $3.46 in fiscal 2017 and is expected to grow 15.6% YoY to $4.00 in fiscal 2018. The PE (price-to-earnings) ratio is a widely used measure by investors to gauge a stock’s fundamental valuation.

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Forward price-to-earnings ratio

The forward PE ratio is based on analysts’ EPS estimates for the next four quarters. This ratio tells us the amount investors are willing to pay per dollar of a company’s EPS.

Intel’s forward PE ratio fell from 13.7x on May 4 to 12.3x on June 29, even though the company raised its second-quarter EPS guidance from $0.85 to $0.99. Analysts revised their fiscal 2018 EPS estimate from $3.84 to $4.00.

Peers’ forward PE ratios

AMD’s forward PE ratio rose from 24.2x to 33.3x during the same period, as analysts expect its fiscal 2018 EPS to more than double to $0.36. Investors are looking at growth as AMD emerged from years of losses to break even in 2017. AMD aims to grow by gaining market share in the PC and server processor markets, as it offers high-performance solutions at a lower price.

NVIDIA’s technology advantage has brought it windfall gains through higher ASP (average selling price) and large volume sales. It has a forward PE ratio of 33.2x, as analysts estimate its fiscal 2018 EPS to grow 44.0% YoY to $7.09.

Intel’s low PE ratio makes it an attractive stock at a lower price. However, the PE ratio alone doesn’t determine whether a stock is a good choice. Investors also look at the company’s efficiency, which we’ll explore in the final article of this series.

Check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look!

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