QUALCOMM's (QCOM) 1.9% Price Movement – A Strong Fundamentals Bet on Future Growth

It's been a great afternoon session for QUALCOMM investors, who saw their shares rise 1.9% to a price of $125.25 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.

A Very Low P/E Ratio but Trades Above Its Graham Number:

QUALCOMM Incorporated engages in the development and commercialization of foundational technologies for the wireless industry worldwide. 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, QUALCOMM has a trailing 12 month P/E ratio of 13.4 and a P/B ratio of 7.08.

When we divide QUALCOMM's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -1.43. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

Growing Revenues With Increasing Reinvestment in the Business:

2019-09-30 2020-09-30 2021-09-30 2022-09-30
Revenue (MM) $24,273 $23,531 $33,566 $44,200
Gross Margins 64.6% 60.7% 57.5% 57.8%
Operating Margins 31.6% 26.6% 29.2% 35.9%
Net Margins 18.07% 22.09% 26.94% 29.27%
Net Income (MM) $4,386 $5,198 $9,043 $12,936
Net Interest Expense (MM) -$627 -$602 -$559 -$399
Depreciation & Amort. (MM) -$1,401 -$1,393 -$1,582 -$1,762
Earnings Per Share $3.59 $4.52 $7.87 $9.38
EPS Growth n/a 25.91% 74.12% 19.19%
Diluted Shares (MM) 1,220 1,149 1,149 1,114
Free Cash Flow (MM) $6,399 $4,407 $8,648 $6,834
Capital Expenditures (MM) -$887 -$1,407 -$1,888 -$2,262
Net Current Assets (MM) -$11,283 -$10,998 -$11,215 -$10,277
Current Ratio 1.88 2.14 1.68 1.75
Long Term Debt (MM) $13,437 $15,226 $13,701 $13,537
Net Debt / EBITDA 0.43 1.17 0.7 0.74

QUALCOMM has growing revenues and increasing reinvestment in the business, strong margins with a stable trend, and exceptional EPS growth. The company also benefits from low leverage, wider gross margins than its peer group, and consistent free cash flow. Furthermore, QUALCOMM has a decent current ratio.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.