Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Intel Corporation stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Intel Corporation has a trailing twelve months PE ratio of 10.8, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 16.6. If we focus on the stock’s long-term PE trend, the current level puts Intel Corporation’s current PE ratio slightly below its midpoint (which is 13.4) over the past five years.
Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 13.1. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Intel Corporation has a forward PE ratio (price relative to this year’s earnings) of just 10.3, so it is fair to say that a slightly more value-oriented path may be ahead for Intel Corporation’s stock in the near term too.
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Intel Corporation’s P/CF ratio of 9.2 is lower than the industry average of 10.8, which indicates that the stock is somewhat undervalued in this respect.
Broad Value Outlook
In aggregate, Intel Corporation currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes INTC a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Intel Corporation is just 1.2, a level that is somewhat lower than the industry average of 1.8. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, INTC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Intel Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of B. This gives INTC a VGM score—or its overarching fundamental grade—of A.
Meanwhile, the company’s recent earnings estimates have been disappointing. The current quarter has seen one estimate go lower in the past sixty days, compared to none higher, while the full-year 2019 estimate has seen one upward and two downward revisions in the same time period.
This has had a noticeable impact on the consensus estimate, as the current quarter consensus estimate has not witnessed any earnings momentum in the past two months, while the full-year 2019 estimate has dipped 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Intel Corporation Price and Consensus
This somewhat bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Intel Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 7% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below: