Some investors think Micron Technology (MU -2.13%) stock is incredibly expensive. In a certain slant of light, they're not wrong.
The memory-chip maker's shares trade at -- make sure you have a seat -- 151 times trailing earnings and 932 times free cash flow today. That's a lofty valuation by anybody's standards.
But there are other ways to assess Micron's market value. The company is in a position to turn a corner and deliver stellar earnings growth in the next few quarters. As a result, Micron's stock looks downright cheap when its share price is measured against forward-looking earnings estimates:
MU Price-to-Earnings Ratio (P/E) (Forward) data by YCharts.
Micron reported its full-year 2024 results last week. Full-year sales surged 62% higher year over year. The unadjusted bottom line swung from a net loss of $5.34 per share to a profit of $0.70 per share.
This company's management isn't in the habit of offering full-year financial forecasts, but the midpoint of Micron's guidance for the next quarter points to an accelerated 84% revenue jump and a net profit of roughly $1.54 per share. That's more than double the total profit of the full fiscal-year 2024 in a single quarter.
Micron's competitive advantages
The financials are soaring for good reason. The cyclical memory-chip industry was due for an upswing, anyway, and that positive trend was accelerated by the artificial intelligence (AI) boom. From engine-training systems to consumer-facing services, the computers involved in AI require a ton of high-speed memory.
Micron is not only a leading provider of these chips, but also boasts an in-house network of advanced manufacturing facilities. The company is also building more factories at the moment while boasting technological advantages over high-end memory makers.
Micron's stock doesn't strike me as expensive at all. The memory giant has plenty of growth-boosting balls in the air, and its earnings are about to make a major breakthrough.
It's an affordable stock in every sense that matters. Yesterday's results can't create investor value tomorrow.
