If I look at three of the largest companies in the Semiconductor Industry because I might be interested in investing, one of the things I like to know is how the stocks have grown long term and if that growth has turned into profits. For this reason I try to look at a 5-year track record on sales and margins - both gross and net for Intel, Texas Instruments and ARM Holdings.
Sales 5-Year Ave
Intel Corp (INTC) 8.82%
Texas Instrument (TXN) (0.74%)
ARM Hldgs (ARMH) 13.31% (specialized- 13.14%)
Industry 6.71%
Long-term sales reveal to me how well a company is moving its products. I would have to give the edge here to Intel since it is doing about 31% better than the industry average. ARM is about average and Texas Instruments has been almost 1% in the red for the past 5-year average - not good.
Net Income 5-Year Ave
Intel Corp 20.74%
Texas Instrument (3.14%)
ARM Hldgs 18.53% (specialized- 9.52%)
Industry 11.61%
After removing all the expenses, taxes…etc from the revenue we end up with the profit or net income. This lets me know how profitable the company has been over the last 5 years. Intel and ARM look very strong here with really nice profits over the period but TXN is again disappointingly in the black again.
5-Year Gross Margins
Intel Corp 58.70%
Texas Instrument 51.00%
ARM Hldgs 92.00% (specialized- 62.20%)
Industry 53.60%
The revenue generated through sales minus the cost of the goods gives me the gross margin. It's what is left over after subtracting the cost of making the goods. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations. Here I would have to give the edge to ARM because it is doing much better than the industry average. TXN continues to disappoint and Intel just does barely better than average.
5- Year Net Margins
Intel Corp 19.7%
Texas Instrument 17.8%
ARM Hldgs 18.00% (specialized- 8.4%)
Industry 15.60%
Unlike gross margin, net margin reveals how effective the company is at cost control and this is important to investors interested in earnings and dividends. ARM has a huge edge here again as it towers over its industry average. Both Intel and Texas Instruments are doing better than the industry but come nowhere close to ARM on this one.
Summary
When I put Intel, Texas Instruments, and ARM Holdings side by side, I think my first choice here would have to be ARM with Intel coming in a close second. I know I would not be interested in TXN right now. I see no sales and revenue is scarce - not my choice. But Intel and Arm both look good over the last 5 years, especially ARM.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
