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The new Tesla Model S and Model X feature AMD’s Ryzen Embedded APU and RDNA-2-based GPU, powering its new infotainment experience. Embedded automotive solutions is now a billion-dollar business for AMD and data centers, two segments of revenue the firm didn’t even have five years ago. 

It’s no surprise that AMD is the second most searched semiconductor stock by financial pros, behind Nvidia (NVDA). On an average day, AMD trades more than 77 million shares.

But like most stocks in the space, shares are down significantly year-to-date. Are AMD’s best days behind it or is now the time to jump in?

Advanced Micro Devices Business

Advanced Micro Devices (AMD) designs semiconductors and microprocessors. Its chips, cards, connection products, and adapters can be found in computers, servers, workstations, gaming consoles, and telephones. 

Unlike Intel (INTC), which manufactures its own processors, AMD focuses solely on design. That’s helped them move from the industry laggard to a top player.

Plus, their acquisition of Xilinx aims to expand the company’s reach, especially in AI.

The firm breaks down its revenues into the following segments: Data Center, Client Revenue, Gaming Revenue, and Embedded Revenue. Each segment has shown explosive growth from last year, helping the firm achieve record revenues. 

Financials

AMD has been growing revenues steadily since 2016. 

In fact, from 2016 to 2021, the firm boosted its revenues from $4.3 billion to $16.4 billion, a 2.8x in growth. Its 12-month trailing revenues are $21.5 billion, as the company is on pace for another record year. Its last quarter, the firm did record revenues of $6.6 billion, which was 70% higher than the same quarter last year. 

AMD has $5.9 billion in total cash and $3.28 billion in total debt. The firm is financially sound, with a current ratio of 2.4x. 

Valuation

AMD trades at a P/E GAAP ratio of 33.7x, notably better than its 5-year average. Meanwhile, its rival Nvidia (NVDA) trades at P/E GAAP ratio of 43.6x. 

However, AMD is not the cheapest stock in its space. Intel (INTC) trades at P/E GAAP ratio of 6.3x, Qualcomm (QCOM) trades at 11.2x, and Broadcom(AVGO) trades 21.6x. At a price/cash flow ratio of 33.4x, AMD is more attractive than NVDA, which is at 44.1x. Yet, INTC is 5.3x, QCOM is at 16.3x, and AVGO at 12.9x. At a price/sales ratio of 4.8x, AMD beats out NVDA at 11.2x and AVGO at 6.4x. While INTC is at 1.64x and QCOM is at 3.3x.

Profitability

AMD does not have as high of a gross profit margin as some of its competitors. But at 50.7%, it’s not that shabby. Just not as strong ast QCOM at 57.9%, AVGO at 75.1%, and NVDA at 60.4x. Compared to its rivals, AMD’s EBITDA margin of 26.1% is not as strong. For example, INTC is at 34.5%, QCOM at 39.8%, AVGO at 57.3%, and NVDA at 35.9%

Growth

AMD has been ramping up, and its evident by its revenue growth. The firm has grown revenues by 61.7% (YoY). Meanwhile, its competitors have grown at a significantly slower pace. INTC has seen its revenue growth decline at -5.4%, QCOM is growing at 29.3%, AVGO at 19.5%, and NVDA at 35.8%.

Our Opinion 7/10

AMD is trading at discount on a P/E basis when compared to its 5-year average. In addition, its growing revenues at a much faster clip than its competitors. Overall, the chip space should continue to grow over the coming years, and we expect AMD to be a major player. We like the stock at these levels, and believe it will be a strong investment for years to come.