Turn on the applause sign, Fool, for Intel (NASDAQ:INTC) posted a strong quarter. Sales climbed 17% year over year, while net income rose 25% over the same period. Gross margin was much higher than expected at 59.3%. And while inventory climbed by close to $200 million, management said it would like to see even higher levels, a sign of strong demand.

The chipmaker is also expecting to increase capital spending for the year by an average of $500 million to accommodate more business and to complete the transition to a more efficient 65 nanometer manufacturing process. Intel can well afford it, especially if it keeps dropping its cost to acquire new sales. Intel grew revenue in the first quarter by $1.34 billion. The cost of sales over the same period rose by $615 million. That's $0.46 for each new dollar of sales -- and a massive improvement from the $1.21 Intel spent for each new dollar of sales in the fourth quarter. All told, Intel appears to be returning to form. And that probably means investors are in for a year of sizable profits.

With all that good news, it would be tempting to write an early epitaph for rival Advanced Micro Devices (NYSE:AMD). But that would be decidedly un-Foolish thinking. Intel's revenue from microprocessors declined slightly from December, as expected. But AMD bucked that trend by booking a 3% sequential sales gain. Intel's strength continued to be chips for notebook computers. AMD, meanwhile, says sales of server processors such as the Opteron hit a new record in the recently completed first quarter.

Still, Intel is a remarkably diversified business, and any AMD gains in microprocessors could be offset by strength in mobile and wireless, among other segments. So it's worth asking: Is Intel stock worth buying? Not likely. Running the numbers through the intrinsic value calculator available to subscribers of Motley Fool Inside Value prices the shares at $23. That assumes trailing 12-month structural free cash flow of $6.3 billion, a 12% discount rate, and 15% earnings growth for the next five years. Growth is assumed to drop to 8% for years six through 10 and 4% thereafter. Critics will undoubtedly take issue with the free cash flow number because I pulled options expenses from net income in arriving at the total. Why? Because the Feds are soon going to require it. And employee stock options transfer wealth from owners to employees, anyway.

Surely some will think I'm just picking on Intel again. But I'm not. Instead, I used this exercise to prove a point I don't think we make enough here: Obviously good companies frequently don't make for good investments. That's because such firms typically sell for exactly what they're worth, or more. Conversely, value investing is all about buying stocks on sale.

Intel may be improving. It may even put the hurt on AMD this year. But it most certainly is not on sale.

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Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.