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Rambus Inc (NASDAQ:RMBS): A Prime Affordable Growth Stock with Strong Fundamentals

By Mill Chart

Last update: Aug 7, 2025

Growth investing often focuses on companies with strong earnings or revenue expansion, but valuations can rise too high in popular names. The "Affordable Growth" method balances these factors by finding stocks with good growth potential and fair valuations, backed by solid profitability and financial strength. This strategy looks for companies that may provide steady gains without the high prices often seen in pure growth stocks. Rambus Inc (NASDAQ:RMBS) appears to fit this model, based on ChartMill’s fundamental review.

Growth Strength Supports the Investment Case

Rambus’s growth profile is strong, earning an 8/10 rating in ChartMill’s evaluation. Key points include:

  • Recent Performance: Revenue rose 35.17% over the past year, while EPS grew 41.42%, showing improved operations.
  • Historical Track Record: The company has averaged 19.59% annual revenue growth and 14.14% EPS growth over several years, proving its ability to scale.
  • Future Projections: Analysts expect EPS to grow 21.01% yearly, with revenue increasing at 9.86%. While revenue growth may slow, profitability seems stable.

For Affordable Growth strategies, steady growth is key to justify holding periods, especially when valuations aren’t low. Rambus’s mix of past performance and future estimates suggests it can grow earnings without relying only on high multiples.

Valuation: Fair Despite Higher Metrics

With a 5/10 valuation score, Rambus isn’t cheap but trades at reasonable levels compared to its industry and growth path:

  • P/E Comparison: Its 29.94 trailing P/E is below the semiconductor industry average (41.85) and close to the S&P 500 (26.99). The forward P/E of 24.79 is lower than the broader market’s 36.36.
  • Growth-Adjusted Measures: The PEG ratio, which includes earnings growth, suggests the stock may be undervalued, a key factor for Affordable Growth screens.
  • Cash Flow Backing: A strong Price/FCF ratio makes Rambus cheaper than 73.6% of peers, indicating its cash flow supports its valuation.

While not a bargain, Rambus’s valuation allows for upside if growth continues, a key feature of the Affordable Growth approach.

Profitability and Health Support Long-Term Potential

Affordable Growth requires more than just growth and fair pricing, operational quality is crucial. Rambus performs well here:

  • Profitability (8/10): Margins are impressive, with an 80.29% gross margin (top 3% of peers) and 35.49% net margin. ROIC of 15.43% beats its cost of capital, adding value.
  • Financial Strength (10/10): No debt, a current ratio of 10.85, and a near-perfect Altman-Z score (20.79) remove balance-sheet concerns. Share count reduction also boosts per-share metrics.

These strengths lower risk and match the strategy’s focus on reliable long-term performers.

Conclusion

Rambus offers a mix of growth, fair valuation, and financial stability, core principles of the Affordable Growth approach. Its semiconductor IP and memory solutions place it in growing markets, while its fundamentals point to strong execution.

For investors looking for similar opportunities, check out more options via ChartMill’s Affordable Growth screen.

Disclaimer: This analysis is not investment advice. Conduct your own research or consult a financial professional before making decisions.

RAMBUS INC

NASDAQ:RMBS (8/8/2025, 8:04:53 PM)

After market: 73.6 +0.74 (+1.02%)

72.86

+0.91 (+1.26%)



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