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Is Qualcomm Stock Undervalued or Overvalued Before Earnings?

Qualcomm (Nasdaq: QCOM) is a large cap company that operates within the semiconductor industry. Its market cap is $84 billion today, and the total one-year return is 6.85% for shareholders.

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Qualcomm stock is underperforming the market. It’s beaten down, but it reports earnings tomorrow. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

Earnings-per-Share (EPS) Growth: Qualcomm reported a recent EPS growth rate of -34.62%. That’s below the semiconductor industry average of 100.7%. That’s not a good sign. We like to see companies that have higher earnings growth.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the semiconductor industry is 56.58. And Qualcomm’s ratio comes in at 13.10. It’s trading at a better value than many of its competitors.

Debt-to-Equity: The debt-to-equity ratio for Qualcomm stock is 38.10%. That’s below the semiconductor industry average of 52.39%. The company is less leveraged.

Free Cash Flow per Share Growth: Qualcomm’s FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

Profit Margins: The profit margin of Qualcomm comes in at 14.93% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Qualcomm’s profit margin is above the semiconductor average of 12.7%. So that’s a positive indicator for investors.

Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Qualcomm is 14.67%, and that’s above its industry average ROE of 14.47%.

Qualcomm stock passes four of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Buy With Caution.

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*The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Wall Street analysts.

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