Please ensure Javascript is enabled for purposes of website accessibility

3 Key Metrics for Intel Corp. Investors to Watch

By Ashraf Eassa – Apr 15, 2018 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Revenue growth, gross profit margin, and operating profit should be top of mind if you're looking into the chipmaker.

When a company reports its financial results, it usually provides investors with a wealth of information to digest. While it's worthwhile to study a company's results in great detail, it's important to be able to cut right to the heart of the results to understand how the company is doing. 

In this column, I'd like to go over three key metrics that investors in chip giant Intel Corp. (INTC 0.89%) should focus on whenever the company reports its quarterly earnings results.

A wafer of Intel processors with a chip on top of the wafer.

Image source: Intel.

1. Revenue growth

Intel is a large, relatively mature company that dominates many of the markets in which it participates, so revenue growth for a behemoth like Intel can be much harder to achieve than it is for a much smaller company.

Nevertheless, it's important for technology companies -- even large ones -- to deliver revenue growth over time, especially as revenue growth is typically required to drive sustainable profit growth.

Intel said back in early 2017 that investors should look for the company to deliver revenue growth in "low single digit" percentages in the subsequent three years (so that's 1% to 3% growth each year beginning in 2017 and going through 2019).

The chip giant delivered 5.7% revenue growth in 2017, exceeding its stated target, and analysts expect the company to turn in 3.6% revenue growth in 2018, and another 3.7% in 2019 -- a little better than what Intel itself guided to.

If Intel can meet or exceed those targets, Wall Street should be happy. If not, then I'd expect the stock price to reflect that disappointment.

2. Gross profit margin

Gross profit margin is another metric that investors should watch. Intel's publicly stated percentage target for gross profit margin is between 55% and 65%, though in recent years the company has delivered numbers solidly in the upper end of that range.

INTC Gross Profit Margin (Annual) Chart

INTC Gross Profit Margin (Annual) data by YCharts.

During Intel's 2017 investor meeting, the company told investors to expect its gross profit margin percentages in 2017, 2018, and 2019 to be in the upper half of that range, or at least 60%.

Now, this figure has historically represented Intel's competitiveness (e.g. processor pricing power and product cost structure) and to a large degree it still does (which is why higher is generally better here). However, Intel's business has become more diverse in recent years as the company tries to sell products beyond computer processors.

Some of the new markets that Intel is going after (e.g. non-volatile memory) are more competitive than the company's core markets, which means that the gross profit margins to be had there are simply lower. Intel succeeding in those markets will necessarily dilute the company's overall gross profit margin percentage. So while that number is still important, it needs to be viewed in a broader context, which brings us to the next metric that investors ought to pay attention to.

3. Operating profit

Probably the most important metric in this article is operating profit. This is a measure of how much profit Intel's business generates, incorporating other key metrics like revenue, gross profit margin, and operating expenses.

At its 2017 investor meeting, Intel said that it expected its operating profit to outgrow revenue during 2017, 2018, and 2019. In 2017, Intel delivered on that promise in a big way, with operating income surging 39.3% to reach $17.94 billion.

Intel projects that, in 2018, it will generate $65 billion in revenue and enjoy an operating margin of 28%. Doing the math, that works out to an operating profit expectation of around $18.2 billion -- a slight increase from what it was in 2017.

Obviously, the faster Intel's operating profit grows, the better. As long as it's growing faster than the company's revenue, then I think investors should be pretty happy.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
INTC
$27.13 (0.89%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.