Micron Technology, Inc. – Value Analysis (NASDAQ:MU) : December 4, 2017

Capitalcube gives Micron Technology, Inc. a score of 78.

Our analysis is based on comparing Micron Technology, Inc. with the following peers – Intel Corporation, STMicroelectronics NV ADR RegS, Photronics, Inc., Netlist, Inc., Rambus Inc., MoSys, Inc. and Western Digital Corporation (INTC-US, STM-US, PLAB-US, NLST-US, RMBS-US, MOSY-US and WDC-US).

Investment Outlook

Micron Technology, Inc. has a fundamental score of 78 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative outperformance over the last year has faded more recently.
  • It’s current Price/Book of 2.49 is about median in its peer group.
  • We classify MU-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • MU-US has relatively high profit margins while operating with median asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • MU-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While MU-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • MU-US has additional debt capacity.

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Leverage & Liquidity

MU-US has additional debt capacity.

  • With debt at a reasonable 26.48% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 23.06%), and a well-cushioned interest coverage level of 9.79x, MU-US has the capacity to borrow some more.
  • All 7 peers for the company have an outstanding debt balance.

MU-US has moved to a relatively high liquidity from a Limited Flexibility profile at the prior year-end.

  • MU-US‘s interest coverage is its highest over the last four years and compares to a low of 0.52x in 2016.
  • While its interest coverage increased to 9.79x from 0.52x (in 2016), its peer median decreased during this period to 3.86x from 4.51x.
  • Interest coverage rose 9.92 points relative to peers (and is now higher than its peer median).
  • MU-US‘s debt-EV has declined 15.40 percentage points from last year’s high and is now below its four-year average debt-EV of 31.88.
  • While its debt-EV decreased to 26.48% from 41.88% (in 2016), its peer median increased during this period to 23.06% from 21.91%.
  • Relative to peers, debt-EV fell 16.55 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Micron Technology, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Intel Corporation 16.38 1.6 18.98 71.18
STMicroelectronics NV ADR RegS 13.01 2.29 27.77 54.16
Photronics, Inc. N/A 5.49 0 166.53
Netlist, Inc. 23.06 1.78 -18.9 -70.7
Rambus Inc. 11.65 1.37 3.86 60.99
MoSys, Inc. 60.05 0.55 -14.15 -134.97
Western Digital Corporation 40.07 2.64 3.5 30.97
Micron Technology, Inc. 26.48 2.34 9.79 88.4
Peer Median 23.06 2.04 3.86 57.57
Best In Class 11.65 5.49 27.77 166.53

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Company Profile

Micron Technology, Inc. engages in the designing, and building memory and semiconductor technologies. It operates through the following segments: Compute and Networking Business Unit, Storage Business Unit, Mobile Business Unit, Embedded Business Unit. The Compute and Networking Business Unit segment includes memory products sold into compute, networking, graphics, and cloud server markets. The Storage Business Unit segment are the products sold into enterprise, client, cloud, and removable storage. The Mobile Business Unit segment includes memory products sold into smart phone, tablet, and other mobile-device markets. The Embedded Business Unit segment is comprised of memory products sold into automotive, industrial, connected home, and consumer electronics markets. The company was founded by Ward D. Parkinson, Joseph L. Parkinson, Dennis Wilson, and Doug Pitman in October 1978 and is headquartered in Boise, ID.

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