3 Big Reasons to Love AMD (AMD)

What a fantastic six months it’s been for AMD. Shares of the company have skyrocketed 43.9%, hitting $230.32. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy AMD? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Is AMD a Good Business?

Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, AMD’s sales grew at an incredible 29.9% compounded annual growth rate over the last five years. Its growth beat the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

2. Projected Revenue Growth Is Remarkable

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.

Over the next 12 months, sell-side analysts expect AMD’s revenue to rise by 27.7%, an improvement versus its 29.9% annualized growth for the past five years. This projection is eye-popping for a company of its scale and implies its newer products and services will fuel better top-line performance.

3. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

AMD’s EPS grew at a spectacular 27.9% compounded annual growth rate over the last five years. This performance was better than most semiconductor businesses.

Final Judgment

These are just a few reasons why we think AMD is a high-quality business, and with the recent surge, the stock trades at 39.9× forward P/E (or $230.32 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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