Tuesday, March 15, 2011

Intel: Too Cheap to Pass Up Again

David Trainer submits:

Recent weakness in Intel (INTC) stock presents an excellent buying opportunity for investors. As one of March?s most attractive stocks, INTC offers the rare combination of strong cash flow growth with a remarkably cheap valuation.

Our model, which tracks performance back to 1998, shows 2010 as the most profitable year ever in terms of accounting earnings, economic earnings, and free cash flow. Return on invested capital (ROIC), which more than doubled to 31% in 2010, is the highest since 1999. The company generated $10bn, 11% of its enterprise value, in free cash flow in 2010. Excess cash is $26bn or over 20% of its market cap.

This strong performance underscores the strength of INTC?s business and the ability of its management team to allocate capital intelligently. They are not perfect and have made mistakes along the way, even recently with the recall of its ?Core i7? chip. However, mistakes for

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