Is Intel 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 Intel 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?
Amount off the current price Intel is available for.
Share price is $36.26 vs Future cash flow value of $40.23
Current Discount Checks
For Intel to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
- Intel's share price is below the future cash flow value, but not at a significant discount (< 20%).
- Intel's share price is below the future cash flow value, but not at a substantial discount (< 40%).
We assess Intel'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)
Intel has a total score of 3/6, 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 (12.23%).
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 Intel 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 @ (3.32%)
||Extrapolated @ (3.32%)
Discounted (@ 9.4%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $15,222 × (1 + 2.3%) ÷ (9.38% – 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 ($189,420 / 4,709)
Value per share:
Current discount (share price of $36.26): 10%
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 = 9.38% = 2.33% + (0.919 * 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))
0.919 = 0.832 (1 + (1- 30%) (15.08%))
Levered Beta used in calculation = 0.919
- 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 Intel expected to perform in the next 1 to 3 years based on estimates from 38 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!
Expected earnings growth over 3 years.
Future Earnings growth analysis
Is Intel expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.
Are Intel's annual earnings growth expected to exceed 3.4% over the next 3 years?
- After 1 year
- After 3 years
1 & 3 year estimated growth in earnings
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?
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.
- Intel is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.
Improvement & Relative to industry
- Expected to be less than the Semiconductors industry average.
- A decline in Intel's performance (ROE) is expected over the next 3 years.
Future performance checks
We assess Intel'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.
Intel has a total score of 2/6, 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 Intel 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 Intel'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.
- Intel's earnings growth has not matched the industry average in the past year.
- Intel's 1 year earnings growth is negative.
- Intel earnings have fallen over the past 5 years.
Intel'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.
- Poor return on shareholders funds (ROE) last year.
- Intel performed worse than the Semiconductors industry average based on return on assets (ROA) last year.
- Performance based on revenue producing assets (ROCE) is broadly the same over 3 years.
Past performance checks
We assess Intel'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.
Intel 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 Intel'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 Intel's finances.
The net worth of a company is the difference between its assets and liabilities.
- Intel is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
- Intel's cash and other short term assets cover its long term commitments.
This treemap shows a more detailed breakdown of Intel'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 (39%) compared to net worth is satisfactory (less than 40%).
- The level of debt compared to net worth has increased over the past 5 years (16% vs 39% today).
- Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
- Interest on debt is well covered by earnings (37.5x coverage).
Financial health checks
We assess Intel'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)
Intel has a total score of 5/6, see the detailed checks below.
What is Intel'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 Intel dividends. Estimated to be 3.12% next year.
If you bought $2,000 of Intel shares you are expected to receive $61 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 above 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.
- Dividends per share have been stable in the past 10 years.
- Dividends per share have increased over the past 10 years.
Current Payout to shareholders
What portion of Intel's earnings are paid to the shareholders as a dividend.
- Dividends paid are well covered by net profit (2.3x coverage).
Future Payout to shareholders
- Dividends after 3 years are expected to be well covered by net profit (2.6x coverage).
Income/ dividend checks
We assess Intel'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 Intel afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
Intel has a total score of 5/6, see the detailed checks below.
What is the CEO of Intel'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.
Mr. Brian M. Krzanich has been the Chief Executive Officer of Intel Corporation since May 16, 2013. Mr. Krzanich served as the Chief Operating Officer of Intel Corporation from January 20, 2012 to May 16, 2013 and its Executive Vice President from November 2012 to May 16, 2013. He served as Senior Vice President of Intel Corporation from January 2010 to November 2012 and its General Manager of Manufacturing & Supply Chain until January 20, 2012 and also served as its Head of Worldwide Manufacturing. He was responsible for all aspects of Intel's factories and operations worldwide. He served as Vice President of Intel Corporation from December 2005 to January 2010. Mr. Krzanich served as General Manager of Manufacturing and Supply Chain of Intel Corporation. Mr. Krzanich was responsible for all aspects of Intel's assembly and test operations worldwide. Mr. Krzanich served as General Manager of Assembly/Test of Intel Corporation until 2010. He joined Intel in 1982. Since 2001, Mr. Krzanich has been responsible for the implementation of the 0.13-micron logic process technology across Intel's global factory network. From 1997 to 2001, Mr. Krzanich served as the Fab 17 plant manager, where he oversaw integrating Digital Equipment Corporation's semiconductor manufacturing operations into Intel's manufacturing network. The assignment included building updated facilities as well as initiating and ramping 0.18-micron and 0.13-micron process technologies. From 1996 to 1997, Mr. Krzanich was the Fab 6 plant manager in Arizona. From 1994 to 1996, he served as a Manufacturing Manager of Fab 12 in Arizona. Previously, he was a process engineer at various Intel locations. He has been a Director of Intel Corporation since May 16, 2013. He serves as a Director of MiaSole, Inc. Mr. Krzanich has been a Director of Deere & Company since January 6, 2016. Mr. Krzanich was presented an Intel Achievement Award in 1999. He holds one patent for semiconductor processing. Mr. Krzanich studied bachelor's degree in Chemistry from San Jose State University in 1982.
- CEO's compensation has been consistent with company performance over the past year.
- CEO's compensation appears reasonable.
Management Team Tenure
Average tenure of the Intel management team:
- The tenure for the Intel management team is about average.
Chief Executive Officer and Director
Chief Financial Officer and Executive Vice President
Group President of Manufacturing
Senior Vice President and General Manager of Sales & Marketing Group
Chief Engg Officer & President of Client & Internet of Things (Iot)Businesses & Systems Architecture
Board of Directors Tenure
Average tenure of the Intel board of directors:
- The average tenure for the Intel board of directors is over 10 years, this suggests they are a seasoned and experienced board.
Board of Directors
Chief Executive Officer and Director
Independent Lead Director
Recent Insider Trading
- No insider transactions in the past 3 months.
Who owns this company?
We assess Intel'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)
Intel 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.
Intel Corporation designs, manufactures, and sells computer, networking, and communications platforms worldwide. It operates through Client Computing Group, Data Center Group, Internet of Things Group, Non-Volatile Memory Solutions Group, Intel Security Group, Programmable Solutions Group, and All Other segments. The company’s platforms are used in notebooks, 2 in 1 systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, and mobile communication components; enterprise, cloud, and communication infrastructure; and retail, transportation, industrial, video, buildings, and other market segments. It offers microprocessors that processes system data and controls other devices in the system; chipsets, which send data between the microprocessor and input, display, and storage devices, such as keyboard, mouse, monitor, hard drive or solid-state drive, and optical disc drives; and system-on-chip and multichip packaging products that integrate its central processing units with other system components onto a single chip. The company also NAND flash memory products primarily used in solid-state drives; security software products that secure computers, mobile devices, and networks; programmable semiconductors and related products for communications, data center, industrial, military, and automotive market segments. It serves original equipment manufacturers, original design manufacturers, cloud and communications service providers, and industrial, communications, and automotive equipment manufacturers. The company was founded in 1968 and is based in Santa Clara, California.
|Market Cap:||$170,748 million|
2200 Mission College Boulevard, Santa Clara, 95054, United States
|Sector:||Semiconductors and Semiconductor Equipment|