Intel Corp is one of the world’s largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It is also the prime proponent of Moore’s law for advances in semiconductor manufacturing. While Intel’s server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has declined. These include areas such as the Internet of Things, memory, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, recently acquiring Altera, Mobileye, Nervana, Movidius, and Habana Labs in order to assist its efforts in non-PC arenas. Intel have more than 100 000 employees and their headquarter is located in Santa Clara, USA.
Intels stock price dropped quite a bit the last weeks. Intel and AMD have been dominating the processor and graphic cards markets for personal computers for years. I’m surprised they aren’t growing more.
Charts
Statistics
The numbers analysis below is the first step in Rule 1 Investing by Phil Town. In his book Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! (no affiliate) he writes about his investing philosophy which centers around four key principles he refers to as the Four M’s: Meaning, Moat, Management and Margin of Safety.
The first requirement is an average annual growth rate of at least 10%, the past 10 years, in the ROIC (Return On Invested Capital), Sales, EPS (Earnings Per Share), Equity and Cash Flow. The average 5 year and 1 year growth rates should also be above 10%. High growth rates suggest a sustainable MOAT.
Next step is to analyse the the Four M’s: Meaning, Moat, Management and Margin of Safety.
The aim is to find a fantastic company, with a great track record, to invest in for at least 10 year. The expected average yearly return is at least 15%. This is used in the calculations. With an investment of 100 USD and a yearly return of 15%, 100 USD will have increased to 405 USD in 10 years time because of interest-on-interest or compound interest.
| Year | 2010 | 2011 | 2012 | 2013 | 2014 |
| ROIC | 23.6% | 25.1% | 19.1% | 14.2% | 16.7% |
| Sales (MUSD) | 43623 | 53999 | 53341 | 52708 | 55870 |
| EPS (USD) | 2.01 | 2.39 | 2.13 | 1.89 | 2.31 |
| Equity (MUSD) | 49430 | 45911 | 51203 | 58256 | 55865 |
| Cash Flow from operating activites (MUSD) | 16692 | 20963 | 18884 | 20776 | 20418 |
| P/E | 7.91 | 8.1 | 7.99 | 11.85 | 13.8 |
| Year | 2015 | 2016 | 2017 | 2018 | 2019 |
| ROIC | 15.5% | 12.1% | 10.2% | 21.8% | 21.0% |
| Sales (MUSD) | 55355 | 59387 | 62761 | 70848 | 71965 |
| EPS (USD) | 2.33 | 2.12 | 1.99 | 4.48 | 4.71 |
| Equity (MUSD) | 61085 | 66226 | 69019 | 74563 | 77504 |
| Cash Flow from operating activites (MUSD) | 19018 | 21808 | 22110 | 29432 | 33145 |
| P/E | 13.44 | 16.21 | 22.6 | 10.41 | 12.68 |
Growth Rates
| Yearly average | 10 year | 5 year | 1 year |
| ROIC | 21% | 16% | 21% |
| Sales Growth Rate | 6% | 7% | 2% |
| EPS Growth Rate | 10% | 19% | 5% |
| Equity Growth Rate | 5% | 6% | 4% |
| Cash Flow Growth Rate | 8% | 15% | 13% |
| Growth rates x 2 | Average P/E | Median P/E | |
| P/E | 10 | 12.5 | 12.3 |
| Calculated future price in 10 years | 77 | 96 | 94 |
| Calculated Price (fair value) | 19 | 24 | 24 |
| Margin of Safety (50%) | 10 | 12 | 12 |
Current price: 48.68 USD
The ROIC rates are good. The other numbers are alright and shows continued growth.
To be considered for further analysis here, as a growth stock, the requirement is that the 10 year yearly average growth rate is at least 5% in all five categories. They are but the current valuations are too high. Current price is almost 50 USD per share. The calculated fair value price is 24 USD share. I will revisit Intel in the future if the price drops.
I’m considering Intel as a longterm trade based on Technical analysis since the price is near support at the weekly 200 SMA. I will probably not take the trade since I’m fully invested.