Why QUALCOMM Incorporated (NASDAQ:QCOM) Could Be Worth Watching

Let's talk about the popular QUALCOMM Incorporated (NASDAQ:QCOM). The company's shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$188 at one point, and dropping to the lows of US$133. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether QUALCOMM's current trading price of US$140 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at QUALCOMM’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for QUALCOMM

What's the opportunity in QUALCOMM?

Good news, investors! QUALCOMM is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 14.02x is currently well-below the industry average of 21.07x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because QUALCOMM’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from QUALCOMM?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. QUALCOMM's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since QCOM is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on QCOM for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy QCOM. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that QUALCOMM is showing 2 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

If you are no longer interested in QUALCOMM, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.