Micron Technology: Should You Stop Wasting Money?

Micron Technology delivered weak results for the fourth quarter. The quarter saw revenue of $3.6 billion, which lies within the estimated range of $3.45 billion-$3.7 billion, and shows a downfall of 15% from $4.2 billion for the fourth quarter of 2014 and a downfall of 7% from $3.9 billion from the third quarter of 2015, driven by the headwind coming from the near-term market.

Moving ahead, the gross margin fell to $970 million from $1.4 billion for the same quarter, 2014. The selling, general, and administrative expenses dropped to $170 million from $180 million for the fourth quarter, and the Research and Development expenses went up to $379 million from $358 million from the fourth quarter, 2015.

Micron’s operating income skidded to $427 million from $828 million for the fourth quarter, last year.
Net income of Micron Technology dropped to $471 million from $1.2 billion for the fourth quarter, 2015. Furthermore, the Diluted Earnings per share skidded to $0.42 from $0.96 for the same quarter, previous year.

Revenue on Segmental basis…Micron’s impressive moves

In order to sustain its competitive edge, the company is talking various measures. The company by combining DRAM Performance with the NAND Flash Reliability has introduced Persistent Memory Solution for addressing the Big Data Challenges.

In addition, Micron Technology has designed XTRMFlash memory, which will help the electronics industry for developing the systems in order to meet the demand of fast system responsiveness and instant-on performance for industrial, consumer, and automotive application. Winbond, by entering into an agreement with the company will to proving XTRMFlash solutions to the company.           

Valuation

Micron Technology has trailing P/E ratio of 6.17 and forward P/E ratio of 6.70. Additionally, Micron has PEG ratio of 11.57, indicating that the company will have to pay very high for its future growth earnings. Moving ahead, company has Price/Sales ratio of 0.96 and Enterprise Value/Revenue of 1.19. Micron’s Current ratio went up to 2.20 from 2.13 for the same period, last year. Its Debt/Equity ratio was comparable at 0.55 with the same period, previous year.

Conclusion…

Micron Technology posted low results for the fourth quarter, 2015 against the fourth quarter, 2014, indeed its results were in line with the estimates. The quarter delivered falling revenue, gross margin, operating profit and net profit against the same quarter, 2014. Further, the Diluted Earnings per share fell to $0.42 from $0.96 for the fourth quarter, previous year.            The company has a higher forward P/E ratio and PEG ratio, making it a risky investment.
Published on Nov 24, 2015
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

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