With SanDisk (SNDK) trading near 52 week highs, I decided to take a closer look at the stock. The valuation metrics come out very mixed but generally lean on the fair value to overvalued side. Below is a closer look at the valuation metrics and the chart.
Valuation: SanDisk's trailing 5 year valuation metrics suggest that the stock is overvalued as all of the metrics are above their respective 5 year averages. SanDisk's current P/B ratio is 1.7 and it has averaged 1.5 over the past 5 years with a high of 2.5 and low of 0.6. SanDisk's current P/S ratio is 2.1 and it has averaged 1.8 over the past 5 years with a high of 3.3 and low of 0.6. SanDisk's current P/E ratio is 12.4 and it has averaged 9.5 over the past 5 years with a high of 16.2 and low of 7.5.
Price Target: The consensus price target for the analysts who follow SanDisk is $60. That is upside of 18% from today's stock price of $50.25 and suggests that the stock is fairly valued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: SanDisk is currently trading at about $50 a share with analysts expecting EPS of $5.47 next year, an earnings increase of 17% y/y, for a forward P/E ratio of 9.2. Taking a look at other semiconductors will give us a better idea of the stock's relative valuation. Intel (NASDAQ:INTC) is currently trading at about $28 a share with analysts expecting EPS of $2.61 next year, an earnings increase of 8% y/y, for a forward P/E ratio of 10.6.
Texas Instruments (NASDAQ:TXN) is currently trading at about $33 a share with analysts expecting EPS of $2.39 next year, an earnings increase of 37% y/y, for a forward P/E ratio of 13.8. Micron Technology (NASDAQ:MU) is currently trading at about $9 a share with analysts expecting EPS of $0.54 next year for a forward P/E ratio of 16.3. The mean forward P/E of SanDisk's competitors is 13.6 which suggests that SanDisk is undervalued relative to its publically traded competitors.
Earnings Estimates: SanDisk has beat EPS estimates every time in the past 4 quarters. The company's EPS figures have come in between 3 cents and 14 cents from consensus estimates or about 2.4% to 14% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: SanDisk is up 16.8% over the past year, outperforming the S&P 500, which is up 12.5%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $49.02 and above its 200 day moving average, which sits at $45.17.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.