Why Micron Stock Is Rated a "Hold" Before Earnings
Micron (Nasdaq: MU) is a $56 billion company today. Investors that bought shares one year ago are sitting on a 139.77% total return. That's above the S&P 500's return of 21.75%.
Micron stock is beating the market, and it reports earnings soon. But does that make it a good buy today? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
✗ Earnings-per-Share (EPS) Growth: Micron reported a recent EPS growth rate of 20.2%. That's below the semiconductor industry average of 140.48%. That's not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the semiconductor industry is 374.77. And Micron's ratio comes in at 10.59. It's trading at a better value than many of its competitors.
✗ Debt-to-Equity : The debt-to-equity ratio for Micron stock is 57.12%. That's above the semiconductor industry average of 51.80%. That's not a good sign. Micron's debt levels should be lower.
✗ Free Cash Flow per Share Growth : Micron's FCF has been lower than that of its competitors over the last year. That's not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
✓ Profit Margins : The profit margin of Micron comes in at 38.58% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Micron's profit margin is above the semiconductor average of 17.22%. So that's a positive indicator for investors.
✓ Return on Equity : Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Micron is 33.13%, and that's above its industry average ROE of 16.88%.
Micron stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a Hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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