Is Advanced Micro Devices undervalued based on future cash flows and its price relative to the stock market?
Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current
share price of Advanced Micro Devices to its discounted cash flow value.
The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.
How is this discounted cash flow calculated?
- The current share price of Advanced Micro Devices is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
We assess Advanced Micro Devices's value by looking at:
- Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
- Is the PE ratio less than the market average, and/ or less than the Semiconductors industry average (and greater than 0)? (2 checks)
- Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
- Is the PB ratio less than the Semiconductors industry average (and greater than 0)? (1 check)
Advanced Micro Devices has a total score of 0/6, see the detailed checks below.
Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (99.17%).
Full details on the Value part of the Simply Wall St company analysis model.
Discounted cash flow (Free cash flow to Equity)
The calculations below outline how an intrinsic value for Advanced Micro Devices is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
5 year cash flow forecast
See our documentation to learn about this calculation.
|Levered FCF (USD, Millions)
||Extrapolated @ (-5.13%)
||Extrapolated @ (-5.13%)
Discounted (@ 9.3%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $239 × (1 + 2.3%) ÷ (9.31% – 2.3%)
Terminal value based on the Perpetuity Method where growth (g) = 2.3%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($2,932 / 945)
Value per share:
Current discount (share price of $11): -255%
Estimate of Discount Rate
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 9.31% = 2.33% + (0.911 * 7.67%)
Estimate of Bottom Up Beta
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.911 = 0.832 (1 + (1- 30%) (13.54%))
Levered Beta used in calculation = 0.911
- The risk free rate of 2.33% is from the 10 year government bond rate in US.
- The bottom-up beta is estimated by analysing other companies in the same industry.
- The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
- The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.
How is Advanced Micro Devices expected to perform in the next 1 to 3 years based on estimates from 27 analysts?
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.
Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Earnings are expected to become positive over 3 years.
Future Earnings growth analysis
Is Advanced Micro Devices expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.
Are Advanced Micro Devices's annual earnings growth expected to exceed 3.4% over the next 3 years?
- After 1 year
- Expected to become positive over 3 years.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Analysts growth expectations
2 year growth check
Which of the these is expected to increase by over 50% in 2 year's time?
- Cash flow is expected to become positive in 2 years.
- Advanced Micro Devices is expected to become profitable in 2 years.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
- Advanced Micro Devices is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.
Improvement & Relative to industry
- Expected to be above the Semiconductors industry average.
- A decline in Advanced Micro Devices's performance (ROE) is expected over the next 3 years.
Future performance checks
We assess Advanced Micro Devices's future performance by looking at:
- Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
- Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
- Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
- Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Advanced Micro Devices has a total score of 5/6, see the detailed checks below.
Note: If no +3 year data is available, +2.5 year data may be used.
Note 2: We use GAAP per Share in all our calculations.
Full details on the Future part of the Simply Wall St company analysis model.
How has Advanced Micro Devices performed over the past 5 years?
The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Advanced Micro Devices's growth in the last year to its industry (Semiconductors).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
- Advanced Micro Devices does not currently make a profit.
Advanced Micro Devices's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
- Strong return on shareholders funds (ROE) last year.
- Advanced Micro Devices had negative or no return on assets (ROA) last year.
- Return based on revenue producing assets (ROCE) is negative or zero.
Past performance checks
We assess Advanced Micro Devices's performance over the past 5 years by checking for:
- Has earnings per share (EPS) increased in past 5 years? (1 check)
- Has the EPS growth in the last year exceeded that of the Semiconductors industry? (1 check)
- Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
- Is the Return on Equity (ROE) higher than 20%? (1 check)
- Is the Return on Assets (ROA) above industry average? (1 check)
- Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Advanced Micro Devices has a total score of 1/6, see the detailed checks below.
Note: We use GAAP Earnings per Share in all our calculations.
Full details on the Past part of the Simply Wall St company analysis model.
How is Advanced Micro Devices's financial health and their level of debt?
A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).
The boxes below represent the relative size of what makes up Advanced Micro Devices's finances.
The net worth of a company is the difference between its assets and liabilities.
- Advanced Micro Devices is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
- Advanced Micro Devices's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of Advanced Micro Devices's finances.
If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
- High level of stock/ inventory/ unsold assets.
- Total debt is covered by short term assets.
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
- The level of debt (344%) compared to net worth is high (greater 40%).
- The level of debt compared to net worth has increased over the past 5 years (192% vs 344% today).
- Total debt is not well covered by annual operating cash flow (less than 20% of total debt).
- Company is making a loss, therefore interest on debt is not well covered by earnings.
Financial health checks
We assess Advanced Micro Devices's financial health by checking for:
Full details on the Health part of the Simply Wall St company analysis model.
- Are short term assets greater than short term liabilities? (1 check)
- Are short term assets greater than long term liabilities? (1 check)
- Has the debt to equity ratio increased in the past 5 years? (1 check)
- Is the debt to equity ratio over 40%? (1 check)
- Is the debt covered by short term assets? (1 check)
- Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
Advanced Micro Devices has a total score of 2/6, see the detailed checks below.
What is Advanced Micro Devices's current dividend yield, its reliability and sustainability?
Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Current annual income from Advanced Micro Devices dividends.
If you bought $2,000 of Advanced Micro Devices shares you are expected to receive $0 in your first year as a dividend.
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account?
It is up there with the best dividend paying companies?
- Paying below low risk savings rate. (2.25%)
- Paying below the markets top dividend payers. (3.18%)
Historical dividend yield
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.
We also check to see if the dividend has increased in the past 10 years.
- Not paying a notable dividend.
- Not paying a notable dividend.
Current Payout to shareholders
What portion of Advanced Micro Devices's earnings are paid to the shareholders as a dividend.
- Not paying a notable dividend.
Future Payout to shareholders
- Insufficient estimate data to determine if a dividend will be paid in 3 years.
Income/ dividend checks
We assess Advanced Micro Devices's dividend by checking for:
Full details on the Dividends part of the Simply Wall St company analysis model.
- Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
- Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
- Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
- If they have paid a dividend for 10 years has it increased in this time? (1 check)
- How sustainable is the dividend, can Advanced Micro Devices afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
Advanced Micro Devices has a total score of 0/6, see the detailed checks below.
What is the CEO of Advanced Micro Devices's salary, the management and board of directors tenure and is there insider trading?
Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
Dr. Lisa T. Su has been the Chief Executive Officer and President of Advanced Micro Devices, Inc. since August 10, 2014 and October 2014 respectively. Dr. Su served as Chief Operating Officer of Advanced Micro Devices, Inc. from July 1, 2014 to October 2014. She served as Senior Vice President and General Manager of Global Business Unit at Advanced Micro Devices, Inc. from January 3, 2012 to July 2014. She served as Senior Vice President of Freescale Semiconductor Holdings I Ltd. from June 18, 2007 to December 2011 and served as its General Manager of Networking and Multimedia from September 2008 to December 2011. She is a highly-respected technology executive and has an Outstanding Record of business execution. She has an impressive track record and solid understanding of the semiconductor industry. She served as Senior Vice President and General Manager of Networking and Multimedia of Freescale Semiconductor Inc. from 2007 to 2011. Dr. Su served as the Chief Technology Officer of Freescale Semiconductor Holdings I Ltd. from June 18, 2007 to August 2009. She served as the Chief Technology Officer of Freescale Semiconductor Inc. since June 18, 2007. Dr. Su is a respected industry leader with more than 13 years of experience in technology development, product management and strategic alliances. She served as Vice President of Semiconductor Research and Development Center at International Business Machines Corp. since October 2005. She joined Freescale from IBM, where she served in various capacities including Vice President of Semiconductor Research and Development, Vice President of Technology Development and Alliances in the IBM Systems and Technology Group. Dr. Su served as a Director of the PowerPCTMproduct line and Emerging Products from 1995 to June 2007. She served in various technical and business positions at IBM including Vice President of Technology Development. She has been a Director of Analog Devices, Inc. since June 7, 2012 and Advanced Micro Devices, Inc. since October 8, 2014. She has authored or co-authored more than 40 technical publications and co-authored a book chapter on next-generation consumer electronics. She was named in MIT Technology Review's Top 100 Young Innovators in 2002 and received the YWCA 2003 Outstanding Achievement Award for Business. She is a Fellow of the Institute of Electronics and Electrical Engineers (IEEE). Dr. Su received B.S., M.S., and Doctorate Degrees in Electrical Engineering from the Massachusetts Institute of Technology.
- CEO's compensation has increased whilst company is loss making.
- CEO's compensation is higher than average for a company of this size and profit level.
Management Team Tenure
Average tenure of the Advanced Micro Devices management team:
- The tenure for the Advanced Micro Devices management team is about average.
Chief Executive Officer
Chief Financial Officer
Chief Technology Officer and Senior Vice President of Technology & Engineering
Senior Vice President and General Manager of Enterprise
Senior Vice President and General Manager of Computing & Graphics Business Group
Senior Vice President of Global Operations
Board of Directors Tenure
Average tenure of the Advanced Micro Devices board of directors:
- The tenure for the Advanced Micro Devices board of directors is about average.
Board of Directors
Chief Executive Officer
Recent Insider Trading
- No insider transactions in the past 3 months.
Who owns this company?
We assess Advanced Micro Devices's management by checking for:
- Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
- Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
- Is the average tenure of the management team less than 2 years? (1 check)
- Is the average tenure of the board of directors team less than 3 years? (1 check)
Advanced Micro Devices has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.
Note: We use the top 6 management executives and board members in our calculations.
Note 2: Insider trading include any internal stakeholders and these transactions
Full details on the Management part of the Simply Wall St company analysis model.
Advanced Micro Devices, Inc. operates as a semiconductor company worldwide. Its primarily offers x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete graphics processing units (GPUs), and professional graphics; and server and embedded processors, and semi-custom System-on-Chip (SoC) products and technology for game consoles. The company provides x86 microprocessors for desktop PCs under the AMD A-Series, AMD E-Series, AMD FX CPU, AMD Athlon CPU and APU, AMD Sempron APU and CPU, and AMD Pro A-Series APU brands; and microprocessors for notebook and 2-in-1s under the AMD A-Series, AMD E-Series, AMD C-Series, AMD Z-Series, AMD FX APU, AMD Phenom, AMD Athlon CPU and APU, AMD Turion, and AMD Sempron APU and CPU brand names. It also offers chipsets with and without integrated graphics features for desktop, notebook PCs, and servers, as well as controller hub-based chipsets for its APUs under the AMD brand; and AMD PRO mobile and desktop PC solutions. In addition, the company provides discrete GPUs for desktop and notebook PCs under the AMD Radeon brand; professional graphics products under the AMD FirePro brand name; and customer-specific solutions based on AMD’s CPU, GPU, and multi-media technologies. Further, it offers microprocessors for server platforms under the AMD Opteron; embedded processor solutions for interactive digital signage, casino gaming, and medical imaging under the AMD Opteron, AMD Athlon, AMD Sempron, AMD Geode, AMD R-Series, and G-Series brand names; and semi-custom SoC products that power the Sony Playstation 4, Microsoft Xbox One, and Xbox One S game consoles. The company sells its products through its direct sales force, independent distributors, and sales representatives. It primarily serves original equipment manufacturers, original design manufacturers, system builders, and independent distributors. Advanced Micro Devices, Inc. was founded in 1969 and is headquartered in Sunnyvale, California.
|Name:||Advanced Micro Devices, Inc.|
|Market Cap:||$10,395 million|
One AMD Place, Sunnyvale, 94088, United States
Advanced Micro Devices employees.
|Sector:||Semiconductors and Semiconductor Equipment|