Stock Analysis

We Think You Should Be Aware Of Some Concerning Factors In Intel's (NASDAQ:INTC) Earnings

Published
NasdaqGS:INTC
Source: Shutterstock

The recent earnings posted by Intel Corporation (NASDAQ:INTC) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Intel

earnings-and-revenue-history
NasdaqGS:INTC Earnings and Revenue History May 6th 2022

How Do Unusual Items Influence Profit?

For anyone who wants to understand Intel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$8.6b worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Intel's positive unusual items were quite significant relative to its profit in the year to April 2022. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Intel's Profit Performance

As we discussed above, we think the significant positive unusual item makes Intel's earnings a poor guide to its underlying profitability. For this reason, we think that Intel's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 35% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Intel at this point in time. For example, we've found that Intel has 2 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Intel's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

Valuation is complex, but we're helping make it simple.

Find out whether Intel is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis