We've been asking ourselves recently if the market has placed a fair valuation on NXP Semiconductors. Let's dive into some of the fundamental values of this large-cap Technology company to determine if there might be an opportunity here for value-minded investors.
A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:
NXP Semiconductors N.V. offers various semiconductor products. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, NXP Semiconductors has a trailing 12 month P/E ratio of 19.3 and a P/B ratio of 6.72.
NXP Semiconductors's PEG ratio is 1.99, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Growing Revenues With Increasing Reinvestment in the Business:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $8,877 | $8,612 | $11,063 | $13,205 |
| Gross Margins | 52.0% | 49.2% | 54.8% | 56.9% |
| Operating Margins | 6.9% | 3.5% | 23.4% | 28.7% |
| Net Margins | 2.74% | 0.6% | 16.91% | 21.11% |
| Net Income (MM) | $243 | $52 | $1,871 | $2,787 |
| Net Interest Expense (MM) | -339 | -357 | -381 | -416 |
| Net Interest Expense (MM) | -$339 | -$357 | -$381 | -$416 |
| Depreciation & Amort. (MM) | -$2,047 | -$1,988 | -$1,262 | -$1,250 |
| Earnings Per Share | $0.85 | $0.18 | $6.79 | $10.67 |
| EPS Growth | n/a | -78.82% | 3672.22% | 57.14% |
| Diluted Shares (MM) | 286 | 284 | 276 | 260 |
| Free Cash Flow (MM) | $1,745 | $1,960 | $2,145 | $2,668 |
| Capital Expenditures (MM) | -$628 | -$522 | -$932 | -$1,227 |
| Net Current Assets (MM) | -$7,094 | -$6,372 | -$8,866 | -$8,561 |
| Current Ratio | 1.82 | 2.14 | 2.13 | 2.12 |
| Long Term Debt (MM) | $7,365 | $7,609 | $10,572 | $11,165 |
| Net Debt / EBITDA | 2.48 | 2.31 | 2.04 | 1.47 |
NXP Semiconductors benefits from growing revenues and increasing reinvestment in the business, exceptional EPS growth, and a steady stream of strong cash flows. The company's financial statements show an excellent current ratio and healthy leverage. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a positive growth rate.
