QUALCOMM INC (NASDAQ:QCOM) – A Potentially Undervalued Stock with Strong Fundamentals

QUALCOMM INC (NASDAQ:QCOM) was identified as a decent value stock by our stock screener. The company combines solid profitability and financial health with an attractive valuation, making it a candidate for value investors. Below, we examine why QCOM stands out based on its fundamental strengths.

Valuation

QCOM’s valuation metrics suggest the stock may be trading below its intrinsic value:

• P/E Ratio: At 13.52, QCOM’s P/E is below the industry average of 48.83 and the S&P 500 average of 26.68.
• Forward P/E: The forward P/E of 12.54 is also lower than both the sector (60.36) and broader market (22.50).
• Price/Free Cash Flow: QCOM trades at a discount compared to 90.91% of its industry peers.
• PEG Ratio: The low PEG ratio indicates that earnings growth is not fully reflected in the stock price.

Profitability

The company earns high marks for profitability, with key strengths including:

• Return on Equity (ROE): At 39.82%, QCOM outperforms 93.64% of semiconductor industry peers.
• Operating Margin: A strong 27.64% margin places it ahead of 87.27% of competitors.
• Consistent Earnings: QCOM has been profitable for the past five years, with stable cash flow generation.

Financial Health

QCOM maintains a solid balance sheet:

• Low Debt: A debt-to-equity ratio of 0.48 indicates manageable leverage.
• Strong Liquidity: Current and quick ratios (2.73 and 2.08, respectively) suggest ample short-term financial flexibility.
• Altman-Z Score: A score of 6.17 signals low bankruptcy risk.

Growth

While growth is not explosive, QCOM shows steady expansion:

• Revenue Growth: Over the past five years, revenue has grown at an average annual rate of 14.76%.
• EPS Growth: Earnings per share have increased by 23.53% annually in the same period.
• Future Outlook: Analysts expect EPS to grow by 10.12% annually, though revenue growth may slow to 3.57%.

Dividend Appeal

QCOM also offers income potential:

• Dividend Yield: At 2.33%, the yield is slightly above the S&P 500 average (2.36%).
• Payout Ratio: A sustainable 34.21% of earnings are allocated to dividends.
• Track Record: The company has paid and grown its dividend for at least 10 years.

For a deeper look at QCOM’s fundamentals, review the full report here.

Our Decent Value screener lists more stocks with strong valuations and solid fundamentals.

Disclaimer

This is not investment advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.