First Cut Stock Study Report

Transcription

1 First Cut Stock Study Report Company Name: Intel Corporation Ticker: INTC Date of Study: 9/7/2012 Price: $ Your Name: address: Trevor Burns trevorb@betterinvesting.org City: Madison Heights State: MI Chapter Name (if applicable): BetterInvesting Home Office Discuss why you consider this to be a high quality, growth company that should be investigated further. Please include comments on historical sales and EPS growth, pre-tax profit margin, return on equity, and debt. Intel is the dominant force in the roughly $30 billion dollar computer processor market. They now ship over 80% of the world's microprocessors. Intel has long held the lead in microprocessor technology and performance. Their research and devlopment budget is unmatched in the industry. Intel is currently stepping up their development to become more competitive in supplying smartphone and tablet manufacturers with their processors. Intel recently acquired antivirus and security software maker McAfee in Intel is in excellent financial shape. At the end of the second quarter of 2012, the firm had $9.2 billion in cash and short-term investments, compared with $7.2 billion in debt. * Historical Sales Growth year average 5.6% * Historical EPS (ten year) growth average 11.4% * Pre-tax profit margin, 5 year average 26.72% * ROE five year average 17.64% * Debt five year average 3 Billion, ** This includes the 6.7 Billion dollar acquisition of McAfee in Briefly describe how the company makes money: Intel Corporation designs, manufactures, and sells integrated digital technology platforms. The company offers microprocessors that process system data and controls other devices in the system; and chipsets, which sends data between the microprocessors and input, display and storage devices, such as keyboard, mouse, monitor, hard drive or solid-state drive, and CD, DVD, or Blue-ray drives. Intel also recently acquired antivirus and security software maker McAfee in 2011.

2 Projected growth rate for sales: 6% Why did you select this rate? Discuss from where future growth will come. I used the ten year average indicated in the SSG of 5.6% and the high projected growth rate of 7-8% per year starting in 2013 predicted from the analysts at MORNINGSTAR to stay with a cautiously averaged lower estimate. Future growth will come from the firm's server processor segment as the trend toward cloud computing will require substantial server build-outs using Intel processors. With a pristine balance sheet, expect future acquisitions by Intel to help the company diversify its operations and enhance profitibility. Additional growth could also potentially come from Intel's ability to become a bigger supplier of tablet and smartphone processors. Projected growth rate for earnings per share: 3.2% Why did you select this rate? I used the Preferred Procedure Calculation in the SSG. Projected High P/E: 15 I projected an estimated average based on the below PE averages. 5 Year Average High P/E: Year Average P/E: Current P/E: Projected Low P/E: NA Projected Low Price: $19.16 This is the 52 week low indicated in the SSG. At the current price, the stock is a (check one): Buy or Hold or Sell At the current price, the upside-downside ratio is: 3.03 to 1 Projected compounded rate of return: 13.5% Your final recommendation (check one): Explain: Buy or Hold or Sell

3 Intel continues to be the dominant market leader in the personal computer chip sector. However, this segment is relatively mature, and thus growth there is likely to stablilize. That said, Intel will continue to augment its manufacturing efficienceis in order to reduce costs. Its pristine balance sheet is also a plus. Look for acquistions in the years ahead, which should help the company diversify its operations and enhance profitability. With continued development of their Atom processors, expect Intel to become much more competitive on the power efficiency front in the next couple of years, which should allow them to achieve design wins in the tablet and smartphone sectors. Intel also bolstered its capabilities as a chip supplier for mobile devices when it bought Infineon's (IFNNY) wireless chip business in In addition, the firm now has partnerships with Motorola Mobility (MMI) and Lenova to supply some of their upcoming smartphone models with Atom processors. ***Data in this report was obtained from the following stock reports; ** Morningstar. ** Yahoo Finance. ** Standard and Poor's.

4 Stock Selection Guide Company Intel Corp Date 8/31/2012 Prepared by Burns Data taken from BI Stock Data Where traded NAS Industry Semiconductors Capitalization --- Outstanding Amounts Reference Preferred ($M) 0.0 % Insiders % Institution Common (M Shares) 5, Debt ($M) 7,185.0 % to Tot Cap 12.8 % Pot Dil VISUAL ANALYSIS of Sales, Earnings, and Price Symbol: INTC FY2011 QuarterEnding (06/12) Sales ($M) Earnings Per Share Latest Quarter Year Ago Quarter Percentage Change 13, , % % (1) Historical Sales Growth 5.6% (3) Historical Earnings Per Share Growth 11.4% (2) Estimated Future Sales Growth 6.00% (4) Estimated Future Earnings Per Share Growth 3.20%

5 2 EVALUATING Management Intel Corp Last 5 Year Avg. Pre-tax Profit on Sales (Net Before Taxes/Sales) % Earned on Equity (E/S / Book Value) 15.78% 24.71% 30.45% 32.48% 21.54% 24.66% 22.34% 16.90% 36.78% 32.93% 26.72% 8.59% 14.67% 19.01% 23.33% 13.49% 16.13% 12.94% 10.20% 22.41% 26.51% 17.64% 3 PRICE-EARNINGS HISTORY as an indicator of the future This shows how stock prices have fluctuated with earnings and dividends. It is building block for translating earnings into future stock prices. PRESENT PRICE 24.8 HIGH THIS YEAR LOW THIS YEAR TOTAL AVERAGE AVERAGE PRICE EARNINGS RATIO CURRENT PRICE EARNINGS RATIO YEAR POTENTIAL This combines price appreciation with dividend yield to get an estimate of total return. It provides a standard for comparing income and growth stocks. A Present Full Year's Dividend $ Present Price of Stock B AVERAGE YIELD - USING FORECAST HIGH P/E Avg. % Payout % 2.47 % Forecast High PE C COMPOUND ANNUAL RETURN - USING FORECAST HIGH P/E Annualized Appreciation Average Yield Annualized Rate of Return A B C D E F G H Year Price Earnings Price Earnings Ratio Dividend % Payout % High Yield High Low Per Share High A / C Low B / C Per Share F / C * 100 F / B * 100 EVALUATING RISK and REWARD over the next 5 years Assuming one recession and one business boom every 5 years, calculations are made of how high and how low the stock might sell. The upside-downside ratio is the key to evaluating risk and reward. A HIGH PRICE - NEXT 5 YEARS Avg. High P/E X Estimate High Earnings/Share 2.80 Forecasted High Price $ B LOW PRICE - NEXT 5 YEARS (a) Avg. Low P/E (b) Avg. Low Price of Last 5 Years (c) Recent Market Low Price (d) Price Dividend Will Support X Estimate Low Earnings/Share 2.39 Forecasted Low Price $ Present Dividend % 2.47 % % High Yield Selected Forecasted Low Price C ZONING using 25%-50%-25% Forecasted High Price Minus Forecasted Low Price Range. 25% of Range 5.71 Buy Zone Hold Zone Sell Zone % to to to Present Market Price of is in the Buy Zone D UPSIDE DOWNSIDE RATIO (POTENTIAL GAIN VS. RISK OR LOSS) High Price Minus Present Price Present Price Minus Low Price To 1 E PRICE TARGET (Note: This shows the potential market price appreciation over the next five years in simple interest terms.) High Price Present Market Price X % Appreciation % Present Yield AVERAGE YIELD - USING FORECAST AVERAGE P/E Avg. % Payout % 2.71 % Forecast Average PE COMPOUND ANNUAL RETURN - USING FORECAST AVG P/E Annualized Appreciation Average Yield Annualized Rate of Return % 2.71 % %