Relative Analysis for Micron V.S. Peers, Reveals Why the Stock May Be Mispriced

Simply Wall St.2022-02-17

Micron Technology Inc., seems unusually attractive when compared to a select set of peers. Today, we will explore how we can do competitor analysis on a fundamental level and see why Micron seems to ...

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DaphneTan
·2022-02-17
Great article!
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SK19
·2022-02-17
💪💪💪
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PrimeBlue
·2022-02-17
The tide has changed for the memory industry withbetter supply demand management. Definitely going well beyond all time high very soon with all the market dynamics now in Micron's favours.
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LuckyPiggie
·2022-02-17
Hmmm already all time high ... can buy?
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Kelvink73
·2022-02-17
Micron is growing it's manufacturing facilities.
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Peers, Reveals Why the Stock May Be Mispriced\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-02-17 10:46 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/relative-analysis-micron-nasdaq-mu-031529180.html><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Micron Technology Inc.,  seems unusually attractive when compared to a select set of peers. Today, we will explore how we can do competitor analysis on a fundamental level and see why Micron seems to ...</p>\n\n<a href=\"https://finance.yahoo.com/news/relative-analysis-micron-nasdaq-mu-031529180.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NVDA","symbol_name":"英伟达","start_time":0,"source_url":"https://finance.yahoo.com/news/relative-analysis-micron-nasdaq-mu-031529180.html","article_id":"2211253659","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2211253659","pubTimestamp":1645065979,"columns":[],"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Micron Technology Inc.,  seems unusually attractive when compared to a select set of peers. Today, w","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NVDA":"英伟达","MU":"美光科技","AMD":"美国超微公司","ADI":"亚德诺","AVGO":"博通"},"translate_title":"微米V.S.的相关分析。同行，揭示了为什么股票可能被错误定价","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MU":1,"ADI":0.9,"AMD":0.9,"AVGO":0.9,"NVDA":0.9},"content_text":"Micron Technology Inc.,  seems unusually attractive when compared to a select set of peers. Today, we will explore how we can do competitor analysis on a fundamental level and see why Micron seems to stand out.Before we start, we should be mindful that Micron is currently trading close to all-time highs, at $96. While many investors see the stock as attractive, we should be cautious when engaging after a \"good\" period for the stock. Even if we do feel some fear of missing out, a stock frequently drops and provides opportunities to buy at a more reasonable price, and if it does shoot up - there will always be other stocks.IntroductionMicron Technology Inc., is a semiconductor company, headquartered in the USA. The company mainly produces DRAM (accounting for 73% of sales in the last quarter), and NAND (accounting for 24% of sales in the last quarter) semiconductors.A quick reminder: DRAM, stands for Dynamic Random Access Memory and is used in many processor systems to provide working memory. NAND is a type of memory, used in components such as memory cards, USB flash drives, SSD drives, smartphones etc.For Micron, the main end use cases of their products are Data Centers, PC & Graphics, Mobile & Intelligent Edge. According to Micron (p. 8), the industry is expected to increase demand for DRAM in the mid to high teens on a long term compound annual growth basis, and a long term CAGR of approximately 30% for NAND demand growth. This means that investors have a bit more margin of safety knowing that a stock is tied to a growing industry.As this article is not going to focus on the fundamentals of Micron, you can get familiar with the performance of the company by visiting our latest analysis for Micron Technology.Now, let's compare the stock to peers!Competitor AnalysisWhile we conduct the analysis based on fundamentals and data, we must note that the process is very subjective and different analysts can come up with very different conclusions.There are 2 main ways where we introduce subjectivity in the process: one is when selecting which and how many peers to analyze, and the other is choosing the metrics by which we make our decisions.For the first part, we will consider the standard set of peers offered by Simply Wall St.If we want, can find more competitors in the semiconductor industry and add them to our analysis.For Micron, we will consider the 4 peers from the Simply Wall St Data:NasdaqGS:MU Select Competitors, 16th 2022The peers above are mostly popular large cap stocks, which are tied to the same industry as Micron and compete for market share.The second step is to compare these companies on a fundamental and pricing basis. What we are looking for is a mismatch between the quality of fundamentals and the price at which a company trades.In the table below, we will see why Micron is an interesting candidate:NasdaqGS:MU Micron Competitor KPIs, 16th 2022Right from the start, we notice a few things.Micron has more revenue than competitors. It turns out that Micron is leading the revenue race - at least in the last 12 months, revenues may normalize after this.All the companies are also high-growth companies, with rates from 15% to 68% in the last 12 months.The peer median growth across 3 years is 14.3%, with NVIDIA and AMD experiencing the highest CAGR of 6.4% and 7.3% respectively in the same period - while Micron had a CAGR of 1.55%. Practically, this means that over the years, NVIDIA and AMD grew faster than the competition and were/are very attractive to investors who hope that the growth will continue.Finally, we can see that NVIDIA and Broadcom are the most profitable of the group, as per their EBIT margins. Micron is closely behind with a 28.8% EBIT margin.EBIT is a measure of profitability before taxes and interest. In a relative analysis, we sometimes choose to scale back up the income statement in order to find more comparable metrics. In any case, the final and truly relevant metric for the value of a stock are the free cash flows attributable to (all or just equity) investors.Now we can use these metrics in order to compare the companies between each other on a price basis.On an EV to Sales and EV to EBIT basis, Micron investors are paying the lowest price per metric. What does this mean?It means that investors are paying US$11.7 for every USD$1 of EBIT, or US$3.4 for every 1 US$ dollar of revenue for Micron. While on the other extreme, we have NVIDIA, with US$71.7 and US$25.4 per dollar of EBIT and revenue respectively.When thinking of investment decisions, we also want to factor-in other drivers such as growth, risk and profitability. In our case, EBIT margins (profitability), don't differ too much within peers, and bringing in risk is a bit on the theoretical side, so we will factor-in growth in the mix and see the results in the chart below:NasdaqGS:MU Pricing vs Value Drivers for Micron & Competitors, 16th 2022The scattershot, brings in past revenue growth, and we can see that even though Micron had lower growth than AMD and NVIDIA, it is still cheaper than both competitors, while the other 2 competitors are not as attractive, since they do not have as much growth as AMD and NVIDIA, while being also highly priced.Now let's note a few technical details and caveats:The analysis does not account for future growth, while the value of a stock lies entirely in the future cash flows. This is why we have disclaimers stating that past performance doesn't equal future gains - because it's true.The analysis does not account for returns on capital, new R&D developments and infrastructure projects/CapEx, and risk. All of these factors matter, and that is why investors should really do good research before buying a stock.I use EV instead of Market Cap/Price, because EBIT and Sales come before interest payments, and it allows me to account for companies that are financing income with large levels of debt.In a relative analysis we assume that the stock will converge upwards or to the level of peers, but it can easily be the case that peers begin declining.ConclusionMicron seems to be trading at a cheaper price relative to our select set of competitors.The company is positioned in a growing industry and their products are in high demand.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9094805486,"gmtCreate":1645103039422,"gmtModify":1676533997123,"author":{"id":"3582594277762001","authorId":"3582594277762001","name":"DaphneTan","avatar":"https://static.itradeup.com/news/5fa1b5420db09a263c8b787fc7d44936","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3582594277762001","authorIdStr":"3582594277762001"},"htmlText":"Great article!","listText":"Great article!","text":"Great article!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9094805486","repostId":2211253659,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9094161148,"gmtCreate":1645085692697,"gmtModify":1676533995606,"author":{"id":"3577755293052640","authorId":"3577755293052640","name":"SK19","avatar":"https://static.tigerbbs.com/ee6b25332525b16399562f21677fa1cd","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3577755293052640","authorIdStr":"3577755293052640"},"htmlText":"💪💪💪","listText":"💪💪💪","text":"💪💪💪","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9094161148","repostId":2211253659,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9094190261,"gmtCreate":1645072944884,"gmtModify":1676533994567,"author":{"id":"4100873749187500","authorId":"4100873749187500","name":"PrimeBlue","avatar":"https://static.tigerbbs.com/7ad38f4e49566a36d2382e4e7b42a0ac","vip":1,"crmLevel":8,"crmLevelSwitch":1,"idStr":"4100873749187500","authorIdStr":"4100873749187500"},"htmlText":"The tide has changed for the memory industry withbetter supply demand management. Definitely going well beyond all time high very soon with all the market dynamics now in Micron's favours.&nbsp;","listText":"The tide has changed for the memory industry withbetter supply demand management. Definitely going well beyond all time high very soon with all the market dynamics now in Micron's favours.&nbsp;","text":"The tide has changed for the memory industry withbetter supply demand management. Definitely going well beyond all time high very soon with all the market dynamics now in Micron's favours.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9094190261","repostId":2211253659,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9094348893,"gmtCreate":1645067597513,"gmtModify":1676533993906,"author":{"id":"4107063207857540","authorId":"4107063207857540","name":"LuckyPiggie","avatar":"https://community-static.tradeup.com/news/33330ac1fe6d6c956e10045c870d6f46","vip":1,"hat":"https://static.tigerbbs.com/f84d87792f02cf78e80ee34979fd31e5","crmLevel":6,"crmLevelSwitch":1,"idStr":"4107063207857540","authorIdStr":"4107063207857540"},"htmlText":"Hmmm already all time high ... can buy?&nbsp;","listText":"Hmmm already all time high ... can buy?&nbsp;","text":"Hmmm already all time high ... can buy?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9094348893","repostId":2211253659,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9094341286,"gmtCreate":1645067529835,"gmtModify":1676533993881,"author":{"id":"3586752204475642","authorId":"3586752204475642","name":"Kelvink73","avatar":"https://static.tigerbbs.com/8c719c2e9dfb696800beef6e2afa018a","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3586752204475642","authorIdStr":"3586752204475642"},"htmlText":"Micron is growing it's manufacturing facilities.","listText":"Micron is growing it's manufacturing facilities.","text":"Micron is growing it's manufacturing facilities.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9094341286","repostId":2211253659,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":111,"commentSize":5,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false}}