With Strong Cash Flow, Qualcomm Stock Poised to Rise?
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.
QCOM Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 9.4%, but Qualcomm stock does
- Strong Margin: Last 12 month operating margin of 27.2%
- Growth: Last 12 revenue growth of 10.3% – low growth, but this selection is all about high yield and margin
- Valuation: QCOM stock is currently trading at 41% below its 2Y high, 12% below its 1M high, and at a PS lower than its 3Y average.
Below is a quick comparison of QCOM fundamentals with S&P medians.
| QCOM | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| Free Cash Flow Yield | 9.4% | 4.3% |
| Revenue Growth LTM | 10.3% | 6.6% |
| Revenue Growth 3YAVG | 2.3% | 5.5% |
| Operating Margin LTM | 27.2% | 18.7% |
| Operating Margin 3YAVG | 26.1% | 18.2% |
| PE Ratio | 25.6 | 23.7 |
*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, and 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:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few years’ average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed as 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
Portfolios Are The Smarter Way To Invest
Stocks can jump or crash, but long-term success comes from staying invested. The right portfolio helps you ride gains and cushion single-stock drops.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, 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. Why is that? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as is evident in HQ Portfolio performance metrics.