Initial notes: this evaluation was made a few days ago, but couldn't post it cause mods temp banned me because apparently, linking your Excel file to let people inspect your calculation and a pdf where you show graphs is bannable. smh. This evaluation was made on 2021 balance sheet data with current macro data and shall not consider yesterday's earnings call.

Good Morning Reddit!

It is me again! Due to requests for an analysis on AMD after i posted a detailed analysis on INTC, soon AMD will have the earning calls so I worked expeditiously to provide you a quick one on the matter!

I must warn that this is just a quick observation of the 2021 balance sheets, ratios and calculations and price forecast. With that, i can already confirm that the company is already over my expectations in regard of revenue, even tho costs have surpassed it too. Net income is still in range to forecast.

TL:DR

• $51.28 factoring Earning Based growth rate
• $54.94 factoring in Earning Based growth rate and ROA
• $4B net income by EOY
• 10.15% overvalued
• Hold and Accumulate

Table of Contents

• Assumptions
• Data
• Risk Analysis
• Sector Comparison
• Ratios
• Evaluation Methods
• Google Search Trends
• Institutional rating changes
• Final Comment

Assumptions

• Stable average growth until 2026
• Company does not pay dividends and reinvest all the earnings into the company
• Slowdown of the economy and the semiconductor sector

Data

Data	Number	Source
Levered Beta	2.05	Yahoo Finance
Unlevered Beta	2.04	Computing
Market Expected Return	9.4%	Motley's Fools, 50y average, 1972-2021
US Interest Rate	4%	Trading Economics, end year forecast rate 31/10/2022
Risk Free Rate	4.054%	Yahoo Finance, 10y US Bonds
Risk Premium	5.19%	Computing
Corp Tax	13.98%	Computing, Tax provision / Income before taxes
CAPM	14.95%	Computing, using unlevered beta
WACC	14.89%	Computing, taking in count credit rating
AAA Bond Yield	5.31%	Moody's Seasoned Aaa Corporate Bond Yield 31/10/2022
EPS	2.49	Yahoo Finance
Average US GDP Growth	3.18%	TradingEconomics 1947 – 2022
Outstanding shares	1,614,321,000	Excel Stock Data 31/10/2022
Next Years Analyst growth estimate	7.5%	Yahoo finance
Next 5 Years Analysts growth estimate	25.46%	Yahoo finance
Growth Rate by earning retention	30.88%	Computing
Growth Rate by ROA & Retention	34.16%	Computing
ROA	25.46%	Computing
Earning Retention Rate	100%	Balance sheet
P/E	24.9	Yahoo Finance
PEG	0.81	Computing
Market P/E	20.29	Mutlpl.com

Risk Analysis

Taking in count the stock's price movement from its maximum timeline, from 1985 to 2022, we have the following data:

Expected Return	1.91%
Variance	3.26%
Standard Deviation	18.33%

Sector Comparison

By taking the Semiconductor Sector in count, which include machinery producers like Murata MFG or TE Connectivity Ltd and differentiate if from the Semiconductor Industry, where we have only the closely related to chip making companies like TSMC, NVIDIA or Intel, we have the following comparison:

Indicator	Numbers
AMD Unlevered Beta	2.04
Sector Beta	1.33
Industry Beta	1.40
P/E	24.9
Sector P/E	21.54
Industry P/E	20.63
Market P/E	20.29

Ratios

Profitability

Gross Profit Margin	46.01%
ROA	25.46%

Efficiency

Accounts Receivable Turnover	53
Accounts Payable Turnover	114
Asset Turnover Ratio	1.54
Inventory Turnover	84
Days sales in Inventory ratio	4.35

Management Effectiveness

ROE	42.18%
ROIC	43.20%
DuPont Analysis	62.87%

Note: DuPont Analysis has the following numbers:

• 0.192 net profit margin
• 1.537 asset turn over
• 1.603 financial leverage

Financial

Cash Ratio	85.09%
Working Capital	2.02
Acid Test	1.49
Debt Ratio	5.32%
Debt to Equity	8.82%
Interest Coverage Ratio	233.21

Value

Price to Book Ratio	13.35
Income Quality	1.11

Evaluation Methods

In this evaluation, i used the following methods:

• Adjusted Graham Formula
• FCF Evaluation Method
• Discounted Unleveread Free Cash Flow

The Final Price is the average price extrapolated from those three ways.

Note: Dividend Discount Model and Total Payout Model are not considered due to the fact that they do not pay dividends.

Adjusted Graham Formula

Data	Number
EPS	2.49
P/E	7
Growth Rate	30.88
1g	1
Corporate Bond	4.4
AAA Bond Yield	5.13
Intrinsic Value	$80.90

Free Cash Flow Evaluation Method

Data	Number
FCF	3,220,000,000
Discount Rate	14.89%
Growth Rate	30.88%
Per share Value	$16.33

Discounted Unleveread Free Cash Flow (2022 to 2026)

Data
Discount Rate	14.89%
UFCF growth rate	30.88%
Average US GDP Growth	3.18%
Shares outstanding	1,614,321,000
Current Value	$56.61

Google Search Trend

Observed Trend, 12 months worldwide, category: “internet & communication”

Intel	#1	80
NVIDIA	#2	65
AMD	#3	56

Institutional rating changes

Changes in rating as for the 2nd November 2022

Institution	Previous	Current	Position
UBS	80	75	Neutral
Keybanc	100	85	Overweight
Deutsche Bank	70	68	Hold

Changes in rating as for the 31th October2022

Institution	Previous	Current	Position
Morgan Stanley	86	77	Overweight

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Final Comment

As we can see, AMD is a good and stable company, with huge potential from its fundamentals. We can expect at least 1.91% return in perpetual from this stock if we want to hold it forever, with a probability to see swings between +20% and -20%.

AMD had a high beta compare to the sector and the industry, this makes it riskier and potentially very lucrative than the average peers.

Its P/E is above the industry and the market itself, probably a little bit overvalued.

High profits margin and ROA suggest us a potential growth, same for ROE and ROIC. DuPont Analysis shows a positive 62.87%.

Financial indicators point out the fact that AMD's financials are stable and not in danger in any front in the short and mid run.

It this company pays dividend, it would have a higher evaluation.

Its current fair value is

$51.28 factoring Earning Based growth rate

$54.94 factoring in Earning Based growth rate and ROA

Reminder that this is based on the balance sheet of 2021 business year's end, in fact, growth in revenue is already over expectation, as well as costs one, but net income not yet, still under 1B missing until now, expecting a net income of 4B EOY

The company is a Long Hold and have high probability to pay dividends in the future, but as for now, it is overvalued by 10-15% due to last year trend. Good buying positions shall be around 50-55 dollars

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What do you think? Any ideas? Suggestions? Feel free to comment! 😀

This is not financial advice