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Intel Valuation

2-24-2016 Current share price: $29.19

Intel Corporation is engaged in the design and manufacture of digital technology platforms.
Intel designs, manufactures and sells digital technology platforms. The platforms are in laptops, desktops, servers, tablets, smartphones, and the Internet of Things. It also develops and sells software and services focused on security and technology integration. Intel’s segments include the PC Client Group, the Data Center Group, the Internet of Things Group, the Mobile and Communications Group, the software and services.

The simplest Valuation is to compare an analyst target to the Current Price.  The analyst target is 22% above the current price.  This suggests up to 22% Potential upside.  Analyst targets are not that valuable, but a target comfortably above the current price is not a bad thing.

Graham Value
The next simplest measures are Graham Valuations.  4 variations are used using different time tables for calculating EPS and EPS growth.  The 2 valuations with the most recent timeframe suggest a value of ~$12.  The low Graham valuation highlights the lack of earnings growth in recent years.  The 3yr/5yr that values Intel at $102 is skewed by Intel taking on significant more debt over that range.  Growing by increasing leverage is falsely modeled as pure growth.

Relative Value
Relative valuations are based upon historic multiples.  For a slow growing, large cap company such as Intel, buying at multiples less than the historic values represent a good value.  Based on historic multiples Intel is within a good value range.  Relative valuations place the medium term downside potential at 5% and the Upside Potential at least 7%.

Intrinsic Value
Intrinsic valuations include discounted cash flow (DCF), dividend discount model (DDM), and Earnings Power Value (EPV).  Two variations of EPV are used.  The DCF and EPV 1 model both value Intel in low 30’s, suggesting a small upside potential.  EPV method 2 punishes Intel severely for the recent increase in debt load.  Intel’s debt to equity ratio is less than 0.3 and is not a true concern.  EPV method 2 is overly conservative and can be ignored.  The $14.44 valuation by the DDM shows that this stock is not a dividend champion that is to be purchased for its dividend. The low valuation is not driven by the current payout but by the fact that dividend growth has stalled in recent years.

Technical Indicators
Simple Moving Average
Intel closed above its 13 day simple moving average indicating a bullish trend.

The MACD is trending above the signal line demonstrating a weak bullish signal. The indicator is still below 0, which is bearish.

On Balance Volume
The OBV slope is negative which is a bearish indicator.

Intel is currently near the low end of being appropriately priced this is seen through relative valuations, DCF, and EPV 1 models.  They suggest that while Intel stock is not at bargain prices, upside potential outweighs downside potential.  This stock passes the initial screening process and is a good candidate for in depth research to determine if it is buy worthy.

Technical indicators do not show a strong trend in bullish or bearish movement.  This means that barring a market-wide move the stock will likely sit in this range for long enough to preform thorough due diligence.  

This website expresses my own opinion.   I am not a financial advisor.  All opinions, research, analyses, and other information provided on this website are provided as general market commentary and do not constitute investment advice.

This post first appeared on Simple Stock Valuation, please read the originial post: here

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Intel Valuation


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