Intel (INTC) is a strong value-based company with growing assets. Many critics argue that Intel will eventually fall by the wayside, similar to Research in Motion (RIMM) or Cisco (CSCO), and that a new company, such as Advanced Micro Devices (AMD), will take its place . Fundamentally, Intel is strong and the company, although losing market share to AMD, is diversifying its business to recoup market share in other businesses.
Intel is very stable, trading at 3.2 times its book value. This is slightly higher than the industry average. However, if you compare the company to AMD - its largest competitor - you will see that Intel has room to run (AMD's book value is at 4 times its current price).
Price to Sales
At this time, Intel's price to sales is at 2.4, which is 0.6 below the industry average - meaning that Intel's share price may have room to run. This also reflects why it may be trading at a premium to the average book value for the industry.
Now, with the foundation set, we look at the remaining metrics
Intel is well above the average with an operating margin of 35.10% or 351 cents per share. That means Intel is making, on average, 9 cents more per share! AMD earns 11 cents per share.
Return on Assets
Intel, again, is above average at 20.08%, beating the industry average by 3% - meaning that, on average, Intel's management team has had a better return on investments than the industry average.
Return on Equity
Intel misses the mark against the industry average, but excels when compared to its peers: Intel has an ROE of 27%. When compared to the industry average of 41.47%, it looks rough, but this can easily be explained. The return on equity is a measure of how much profit can be generated with shareholders' money and the larger the company is, the harder it becomes to generate a higher return. This has been addressed by Warren Buffett many times.
Now let's look at the return on equity for Intel when compared to its peers. Intel has an ROE of 27% while its peers have an ROE of 18.26%; again this shows Intel's profitability and stability when compared to a smaller and more agile firm.
Return on Investment
Intel again shines with a 24.16% return on investment. So, out of the fundamental "management ranking" ratios, we have Intel topping the charts.
Even though the fundamentals are interesting, they are just the beginning. In February of this year, Intel bought McAfee, Inc for $7.7 billion and finalized the deal to buy Infineon's (OTCQX:IFNNF) wireless division for $1.4 billion.
Now the McAfee deal makes one pause, but think about it like this: Most PCs - at least the PCs in my house - have an Intel chip in them and many come installed with McAfee security essentials. So, while the synergy is not quite apparent, it does lend itself as a bargaining chip for contracts with different PC manufacturers.
The Infineon deal was great for Intel. Looking at companies such as Cisco (NASDAQ:CSCO) and Alcatel (ALU), who are trying to shift the market into wireless technology, Intel will need a leg up to remain competitive and that is exactly what the Infineon purchase offers.
Moving beyond the new markets that Intel is now reaching, or planning to reach, Intel's dividend is rock solid at a 3.42% yield and the dividend continues to grow, making this an ideal value play. If market conditions remain the same, Intel could hit $25 by the end of the year.
Disclosure: I am long INTC.