Is Micron Technology a pricey tech stock or a hidden gem in plain sight? This eye-opening chart might help you decide.
Some investors think Micron Technology (MU 0.64%) 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.
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.