This article first appeared on Simply Wall St News.
After a parabolic jump in July, Advanced Micro Devices (NASDAQ: AMD) stock had an uneventful rest of the summer, as the stock retraced toward the key psychologic level of U$100.
With the stock making a clean lower high, in addition to the broad market pullback, it would not be surprising to see it overshoot toward the key level at US$95. This sets an opportunity for those waiting for the next opportunity to get in or increase their long positions.
Check out our latest analysis for Advanced Micro Devices
Xilinx's (NASDAQ: XLNX) acquisition remains in the spotlight amid the Chinese regulatory pressures. The US$35b strategic acquisition is still waiting for approval for China, with the positive initial rumors. The company has already secured antitrust approvals from Europe and the U.S.
Meanwhile, AMD is looking to expand its server CPU market share, as it will deliver its EPYC 7532 and EPYC 7543 processors for the new Polaris supercomputer at the Department of Energy (DOE). Along with AMD's processors, the supercomputer will use Nvidia's GPUs.
In addition, Cloudflare is pushing for AMD's products as well, as they stated that the power consumption was significantly lower compared to Intel's alternatives. While retail clients might have brand preferences, when it comes to large-scale server operations, power consumption is a significant variable in the overall profitability equation.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess a company's profitability concerning its equity capital.
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Advanced Micro Devices is:
49% = US$3.4b ÷ US$7.1b (Based on the trailing twelve months to June 2021).
The "return" is the yearly profit.
So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.49.
We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain," we can evaluate a company's future ability to generate profits.
Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the company's growth rate compared to companies that don't necessarily bear these characteristics.
First thing first, Advanced Micro Devices has an impressive ROE. Additionally, the company's ROE is higher than the industry average of 15%, which is remarkable.
As a result, Advanced Micro Devices' exceptional 81% net income growth was seen over the past five years doesn't come as a surprise.
We then compared Advanced Micro Devices' net income growth with the industry, and we're pleased to see that the company's growth figure is higher when compared with the industry, which has a growth rate of 16% in the same period.
Earnings growth is a huge factor in stock valuation. An investor needs to know whether the market has priced in the company's expected earnings growth (or decline).
By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Advanced Micro Devices''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
On the whole, we feel that Advanced Micro Devices' performance has been quite good. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This, of course, has caused the company to see substantial growth in its earnings.
Given the exceptional returns, it is also not surprising that the company is not paying a dividend yet, but we can expect that down the road as the expansion slows down and returns move closer to the mean.
Having said that, the company's earnings growth is expected to slow down, as forecast in the current analyst estimates. To know more about the company's future earnings growth forecasts, take a look at this free report on analyst forecasts to find out more.
Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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As Yogi Berra (along with several others) is credited with saying, "It's tough to make predictions, especially about the future." Problem is, that's exactly what investors in semiconductor specialist Nvidia (NASDAQ: NVDA) are being called upon to do as they gauge the likely duration of the global semiconductor shortage. Case in point: Shares of Nvidia had dropped 3.7% through 9:50 a.m. EDT today based on what should be good news for the stock.
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Since the end of the Great Recession in 2009, growth stocks have been off to the races — and with good reason. Chances are that growth stocks still have plenty of runway left to shine. Right now, the following trio of fast-growing companies stands out for all the right reasons, and offers the potential to make investors a lot richer in the fourth quarter, and most importantly, well beyond.
Shares of these exploration and production companies all took off this morning, as the world continues to deal with a broad energy crunch.
We all want to know where the markets are going. They’re off their record peaks, hit in earlier September, and the main indexes have recently been alternating up and down sessions. It’s a confusing situation, and investors can be forgiven for uncertainty. Ari Wald, head of technical analysis at Oppenheimer, believes the S&P "becomes increasingly attractive toward 4,230 (July low)." Looking ahead, Wald boosts his Q1’22 projection for the benchmark index to 4,800 from 4,400. Noting that the index-
When eBay spun off PayPal (NASDAQ: PYPL) in an IPO in 2015, the online payments company was worth about $45 billion. Today, PayPal has a market cap of just over $300 billion. PayPal's annual revenue grew from $9.24 billion in 2015 to $21.45 billion in 2020, as its number of active accounts rose from 179 million to 377 million.
Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock […]AMC Entertainment Group (NYSE: AMC) has some pretty optimistic shareholders. AMC stock is up over 1,800% this year. On Sept. 30, AMC announced a repurchase of $35 million of its debt bearing a minimum 15% interest rate.
This article first appeared on Simply Wall St News.