Some investors think Micron technology (NASDAQ:MU) Stocks are extremely expensive. In a certain light they are not wrong.
Shares of the memory chip maker are trading today at – get your seat – 151 times earnings and 932 times free cash flow. That is a lofty rating by anyone’s standards.
But there are other ways to assess Micron’s market value. The company is positioned to turn around and deliver stellar earnings growth in the coming quarters. As a result, Micron’s shares look downright cheap when the stock price is measured against forward-looking earnings estimates:
Micron reported its full-year 2024 results last week. Full-year revenue rose 62% year over year. The unadjusted result went 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 making full-year financial forecasts, but the midpoint of Micron’s guidance for next quarter points to accelerated 84% revenue growth and net income of roughly $1.54 per share. That is more than double the total profit of the entire fiscal year 2024 in one quarter.
Micron’s competitive advantages
The financial numbers are rising for good reasons. The cyclical memory chip industry was due for a revival anyway, and that positive trend was accelerated by the rise of artificial intelligence (AI). From motor training systems to consumer-facing services, the computers involved in AI require a lot of super-fast memory.
Micron is not only a leading supplier of these chips, but also has an internal network of advanced manufacturing facilities. The company is also currently building more factories while having technological advantages over advanced memory manufacturers.
Micron shares don’t seem that expensive to me at all. The memory giant has plenty of growth-boosting balls in the air, and its earnings are about to make a big break.
It’s an affordable stock in all the ways that matter. Yesterday’s results cannot create investor value tomorrow.
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Anders Bylund has positions in Micron Technology. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Do you think Micron Technology stock is expensive? This chart may change your mind. was originally published by The Motley Fool
