This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Intel vs. AMD: Analyst's Toolkit

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

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.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AMD $2.89 -3.00%
INTC $33.62 -0.33%
AAPL $129.19 2.20%
FB $80.60 -0.75%
GOOG $572.89 -0.42%

Markets

DOW 18,070.34 -65.38 -0.36%
S&P 500 2,093.02 -8.02 -0.38%
NASDAQ 4,972.8440 -9.9650 -0.20%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs