(1) QCOM’s historical growth has been trending down for the last five years: from 17.4% Sales & 6.2% EPS since 2005, to 8.4% & -8.1% during the last three years, to -6.5% &-23.0% during its last reported year (2008), all with S&P data.
(2) In mid-January, Value Line reported that QCOM had reduced its 2010 Sales estimate and, as a result, VL lowered its 2010 estimate by nearly 6.0%, from $11.35B to $10.7B.
(3) When I did my SSG on 2-26-10, the seven analysts I always check were estimating long-term EPS at an average 15.61% with YahooFinance high at 19.86% and Value Line low at 6.00%. VL looks like a low-ball outlier as the average of the other six was 17.21%.
– At Reuters.com, 15 analysts contributed to its 16.27% consensus estimate and ranged from a high of 30.00% to a low of 4.60%. At CNNMoney, 13 analysts contributed to its 17.00% consensus and ranged from a high of 30.00% to a low of 13.00%.
– QCOM’s historical growth seems too low to provide meaningful guidance for the future and the analysts seem too errratic as well as overly-optimistic. Should I estimate EPS for the next five years at:
- around 4.60% (the lowest of the 15 analysts at Reuters); or
- 06.00% (VL’s estimate); or
- 13.00% (the lowest of the 13 analysts at CNNMoney); or
- 14.00% (average without VL less 2 Standard Deviations); or
- around 15.60% (average without VL less 1 SD).
– I need to read QCOM’s latest annual and quarterly reports to learn the products that are likely to drive future growth which should help me decide whether to be conservative or optimistic.
– I initially estimated 10.00% EPS in Armin-1 and 13.00% in Armin-2 with all other judgments the same. My SSGs are set forth in the table that follows. I also compared my SSGs to the analysis by Take Stock.
(4) Take Stock is a computerized, one-click program at the StockCentral website that is intended to produce a conservative result.
** Take Stock’s analysis of QCOM looks nutsy to me.
(5) With S&P data, QCOM’s 5 year average Pre-Tax Profit Margin and Return on Equity are both trending down, but are both substantially better than their industry averages (PTPM: 39.30% QCOM vs 28.5% Communication Equipment Industry) (ROE: 19.50% QCOM vs 10.40% Industry).
** QCOM’s PTPM and ROE may be trending down because they are unsustainably high rather than due to deteriorating fundamentals.
(6) To go to my Table of Contents: click here
| Qualcomm (QCOM) | Armin-1 | Armin-2 | Take Stock at StockCentral.com |
| Date | 2-26-10 | Same | 2-26-10 |
| Data | S&P | Same | Hemscott-Morningstar |
| Price | $36.68 | Same | $36.68 |
| 52 week High & Low Price | $49.80 & $32.64 | Same | N/A |
| Last Quarter of Reported Data | Q1 ending 12-31-09 | Same | Same |
| Software Used | TK 6 | Same | TS Online |
| Project Growth From End of | Last Q | Same | Last FY |
| Sales Growth | 10.00% | Same | -06.20% |
| EPS Growth | 10.00% | 13.00% | -16.20% |
| High PE | 25.0 | Same | 30.0 |
| High EPS | $2.83 | $3.24 | $0.39 |
| High Price | $70.70 | $81.00 (8% > VL) | $11.70 (78% < VL) |
|
Value Line Estimated High Price = $55-75 as of 12-25-09 |
|||
| Low PE | 15.0 | Same | 18.8 |
| Low EPS | $1.76 (ttm) | Same | 0.91 |
| Low Price | $26.40 (low PE x low EPS) | Same | $17.11 (overriding Low PE x Low EPS of $28.70) |
| Upside/Down | 3.3 | 4.3 | Impossible to Calculate |
| Total Return | 15.3% | 18.5% | -18.6% |
| SSG Buy Under | $37.19 | $40.05 | $6.33 |
| RV/PRV | 80.9/73.7 (2 outliers: 2005 &2006) | Same/71.8 | Not Used |
| RV/PRV | 78.2/71.2 (no outliers) | Same/69.3 | Not Used |
| Quality | S&P = B | Same | 0.50 (unacceptable) |
| PTPM – 5 yr ave | 39.3% Trend down | Same Same | 33.3% Trend N/A |
| ROE – 5 yr ave Beginning Equity | 19.5% Trend down | Same Same | Not Used |
| ROE – 5 yr ave Ending Equity | 16.8% Trend down | Same Same | 19.1% Trend N/A |
| Debt to Equity – 5 yr ave | 0.5% Trend even | Same Same | Not Used |
Fundamental Investing Using the Stock Selection Guide (SSG) by armin fields 