Get ready to be inundated with earnings analyses. One of Wall Street's most popular stocks, Qualcomm (NASDAQ:QCOM), reports tomorrow, and there should be no lack of punditry in the aftermath. Before the rush begins, though, let's take a look at a few of the numbers that matter.
Wall Street Wisdom:
- General consensus. Blue Horseshoe loves Qualcomm -- and so do the analysts. No fewer than 37 of them follow Qualcomm, and the vast majority love the stock, which gets nine "holds" and a single "sell" -- with everyone else cheering "buy!"
- Revenues. Really, with numbers like these, who wouldn't love Qualcomm? Analysts believe the company boosted its revenues by 26% to $1.75 billion in its fiscal first quarter of 2006.
- Earnings. They think profits did even better, and they predict that Qualcomm earned $0.38 per share -- a 36% increase over last year's Q1.
Margin watch:
But if you really want to know why analysts love Qualcomm, just take a look at its margins. It's not often you find a company sporting 40% operating margins or a 30% net this side of Microsoft (NASDAQ:MSFT). True, the operating margins have been on a bit of a slide recently, but just a bit -- and for good reason. As my fellow Fool Dave Mock pointed out a few months back, Qualcomm has upped its research-and-development expenditures significantly in recent quarters, so that operating margin pullback might be likened to the compressing of a spring. It looks smaller now, but wait until it releases.
|
Margins % |
6/04 |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
|---|---|---|---|---|---|---|
|
Gross |
70.6 |
69.6 |
69.5 |
69.4 |
69.1 |
71.0 |
|
Op. |
43.6 |
42.2 |
41.2 |
40.1 |
39.0 |
41.6 |
|
Net |
34.9 |
35.2 |
37.2 |
36.9 |
38.2 |
37.8 |
Valuation metrics:
High quality rarely comes without a high price tag. If you want to own a piece of Qualcomm, it's going to cost you 37 times earnings (and the same multiple to free cash flow) to do it.
Competitors:
Here's a nice dilemma to have: Qualcomm's biggest competitors occasionally pay it royalties for using its technology. They include Nokia (NYSE:NOK) and Texas Instruments (NYSE:TXN).
Microsoft is a Motley Fool Inside Value recommendation. Click here to take our value-investing newsletter for a free 30-day spin.
Fool contributorRich Smithowns shares of Nokia. The Motley Fool has a disclosure policy.
