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.
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.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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