Cash Flow Analysis---Intel
Page 3.
I hate trying to read those wide-screen posts, so in the interest of making this a bit easier on folks, I'll rely on you to refer to the 10K when appropriate.
OK, so our calculations have taken us to 6.409 Billion in FCF before the rest of the adjustments.
In the investing section the entries are: Additions to PPE(which, from here on I'll refer to as CAPEX) of (7309): Acquisitions of (883); Purchases of Investments of (7141); Sales of investments of 15,398; and Other activities of (260). With the exception of the CAPEX, the simple thing to remember in this section is that what was subtracted you add back and what was added you subtract out because with the exception of CAPEX, none of this stuff is from operations, so we want to back out their impact on the bottom line.
However, depreciation was only 4131 for this period so it looks like INTC is excess spending on CAPEX. As a rule of thumb, I like to make the two items of equal value and back out the difference. It is a short-cut way that I take which says: "If you maintain your equipment, you'll maintain your profits." I know that this is simplistic, but it works to help me standardize how to evaluate these numbers when I don't know squat about what the real needs might be.
So, the calculations here are: 6409 + (7309-4131) + 883 + 7141 - 15398 + 260 = $2,473 Millions or $2.473Billion in Free Cash Flow. Sounds like a lot of money doesn't it? I know I'd like to have that much after a years business! However, is it? Let's break it down into terms that might be a little more real for us. Let's look at what the per share amount is.
The income statement says that there were 6.879 Billion shares outstanding assuming dilution. So...(2.473/6.879)=$.36/share cash flow.
Is this a good amount of cash flow per share? I don't know. Let's compare it to something I can understand, like a CD or an Investment-grade Bond yielding 5%. Let's say INTC is selling for $20/share. Then a 5% CD or Bond would return $20.00 X .05 = $1.00 or almost 3 times as much as what INTC returns.
Shouldn't that be the other way around? When I assume market risk, shouldn't I get 2 or 3 times the return I can safely get? Not 1/3? Food for thought.
Timba |
