QUALCOMM, Inc. (QCOM), Advanced Micro Devices, Inc. (AMD): There Is a 100% Upside in This Giant Chipmaker

Valuation

Based on the current P/E, Intel is nearly five times cheaper than the average company in the industry. The company’s recent development in smartphone processor chips also presents a huge upside in terms of earnings growth. Intel is at a turning point where the impact caused by the mobile wave is wearing out as the company introduces itself in style.

The previous projected earnings growth rate, which factored in recent declines, has been affected negatively. This could mean that the earnings growth rate may have been understated. Based on the PEG of 1.24, the current earnings growth rate for the next five years is roughly 20%. However, Intel still has the potential to grow earnings by at least 30% when its smartphones processor sales peak in 2014. This means that the company could be trading at well over $55 per share by 2015, which is more than 100% upside.

The bottom line

Intel’s balance sheet looks very healthy with an operating cash flow of more than $20 billion, against a debt of $13.35 billion. The company’s dividend yield of 3.50%, and a payout ratio of 44% is also very impressive and puts it among the best dividend payers.

Furthermore, Intel has already indicated its intention to capture a sizable market share as it seeks to capitalize on the world’s most promising market in the technology industry (the smartphones and tablets market.) This ensures that it remains relevant and competitive going forward. Finally, as revealed, Intel’s current price could be set to double in the next two to three years. In my opinion and assessment, is a very realistic target.

Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article There Is a 100% Upside in This Giant Chipmaker originally appeared on Fool.com is written by Nicholas Kitonyi.

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