Strong Cash Yield: Is Qualcomm Stock A Buy?

Qualcomm (QCOM) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With QCOM

QCOM stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.

The stock may not reflect it yet, but here is what’s going well for the company. Qualcomm’s automotive segment demonstrates strong momentum, with a $45 billion design pipeline and over 75 million vehicles powered by Snapdragon Digital Chassis. The company is also expanding into AI PCs, with 150 Snapdragon designs planned for 2026, emphasizing on-device AI. This diversification contributed to Q4 FY2025 revenue increasing 10% year-over-year, and Q1 FY2026 guidance projected revenue of $11.8-$12.6 billion, exceeding expectations.

QCOM Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 7.8%, but Qualcomm stock does
• Strong Margin: Last 12 month operating margin of 28.0%
• Growth: Last 12 revenue growth of 13.7% – low growth, but this selection is all about high yield and margin
• Valuation: QCOM stock currently trading at 30% below 2Y high, 16% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of QCOM fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While QCOM stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. QCOM plunged nearly 79% in the Dot-Com Bubble, took a hit of 48% during the Global Financial Crisis, and dropped about 44% in the recent inflation shock. Even the less severe events — like the 2018 Correction and the Covid selloff — dragged the stock down over 33% and 36%, respectively. Strong fundamentals matter, but sharp market selloffs still push down even solid names hard. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read QCOM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell QCOM Stock.

Stocks Like QCOM

Not ready to act on QCOM? Consider these alternatives:

1. Salesforce (CRM)
2. Adobe (ADBE)
3. Elevance Health (ELV)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

Move Beyond Single Stocks With A Multi Asset Portfolio

Stocks can jump or crash but different assets move on different cycles. A multi asset portfolio helps you stay invested while cushioning swings in equities.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices