Intel vs. AMD: Analyst's Toolkit

BOSTON (TheStreet) -- Intel(INTC) shattered earnings estimates last week, leaving many to expect the same from smaller chipmaker AMD(AMD).

AMD's stock, up 26% since Dec. 1, has more than quadrupled over 52 weeks. Intel has risen 61% in the past year. That suggests AMD has thumped Intel in earnings performance and chipped away at market share. That's simply not the case.

A comparison of basic metrics for Intel and AMD show a stark contrast between the two. Investors should consider the following data before jumping into AMD on a hunch because its gains aren't rooted in reality. Even a phenomenal earnings release tomorrow could fall far short of lending support to the massive share-price run-up.

Price-to-Earnings Ratio

Intel: 12.8 AMD: N/A

The semiconductor industry has an average P/E ratio of 24.9, nearly twice Intel's 12.8, suggesting the stock is cheap. AMD, on the other hand, has been posting losses. If an investment really is worth the present value of future cash flows, you have to wonder about AMD.

Price-to-Earnings-to-Growth Ratio

Intel: 1.19 AMD: N/A

Since AMD doesn't have a P/E ratio, the PEG ratio is incalculable. As for Intel, a PEG ratio of 1.19 suggests a slightly overpriced position relative to projected growth. AMD is projected to grow 12.5% versus 11% for Intel, but the difference is negligible.

Sustainable Growth

Intel: 7.1% AMD: 0%

Again, AMD's inability to generate a profit since 2006 has led to another no-contest victory for Intel. Sustainable growth is the product of the return on equity and retention ratio, the amount the company keeps rather than pays out in dividends. That leads, in theory, to a growth rate the company can generate off its earnings. Sustainable growth of about 7% isn't bad, but for Intel to hit the projected growth rate of 12.5% that analysts are expecting, it means the company may need to lever up its operations.