Stock Analysis on Net

Qualcomm Inc. (NASDAQ:QCOM)

Dividend Discount Model (DDM) 

Microsoft Excel

Intrinsic Stock Value (Valuation Summary)

Qualcomm Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 16.01%
0 DPS01 2.86
1 DPS1 3.58 = 2.86 × (1 + 25.34%) 3.09
2 DPS2 4.39 = 3.58 × (1 + 22.37%) 3.26
3 DPS3 5.24 = 4.39 × (1 + 19.40%) 3.35
4 DPS4 6.10 = 5.24 × (1 + 16.43%) 3.37
5 DPS5 6.92 = 6.10 × (1 + 13.46%) 3.29
5 Terminal value (TV5) 308.68 = 6.92 × (1 + 13.46%) ÷ (16.01%13.46%) 146.92
Intrinsic value of Qualcomm Inc. common stock (per share) $163.28
Current share price $127.58

Based on: 10-K (reporting date: 2022-09-25).

1 DPS0 = Sum of the last year dividends per share of Qualcomm Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 3.76%
Expected rate of return on market portfolio2 E(RM) 13.66%
Systematic risk of Qualcomm Inc. common stock βQCOM 1.24
 
Required rate of return on Qualcomm Inc. common stock3 rQCOM 16.01%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rQCOM = RF + βQCOM [E(RM) – RF]
= 3.76% + 1.24 [13.66%3.76%]
= 16.01%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Qualcomm Inc., PRAT model

Microsoft Excel
Average Sep 25, 2022 Sep 26, 2021 Sep 27, 2020 Sep 29, 2019 Sep 30, 2018 Sep 24, 2017
Selected Financial Data (US$ in millions)
Dividends 3,303 3,097 2,972 3,034 3,517 3,314
Net income (loss) attributable to Qualcomm 12,936 9,043 5,198 4,386 (4,864) 2,466
Revenues 44,200 33,566 23,531 24,273 22,732 22,291
Total assets 49,014 41,240 35,594 32,957 32,686 65,486
Stockholders’ equity 18,013 9,950 6,077 4,909 928 30,746
Financial Ratios
Retention rate1 0.74 0.66 0.43 0.31 -0.34
Profit margin2 29.27% 26.94% 22.09% 18.07% -21.40% 11.06%
Asset turnover3 0.90 0.81 0.66 0.74 0.70 0.34
Financial leverage4 2.72 4.14 5.86 6.71 35.22 2.13
Averages
Retention rate 0.36
Profit margin 21.49%
Asset turnover 0.76
Financial leverage 4.31
 
Dividend growth rate (g)5 25.34%

Based on: 10-K (reporting date: 2022-09-25), 10-K (reporting date: 2021-09-26), 10-K (reporting date: 2020-09-27), 10-K (reporting date: 2019-09-29), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-24).

2022 Calculations

1 Retention rate = (Net income (loss) attributable to Qualcomm – Dividends) ÷ Net income (loss) attributable to Qualcomm
= (12,9363,303) ÷ 12,936
= 0.74

2 Profit margin = 100 × Net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × 12,936 ÷ 44,200
= 29.27%

3 Asset turnover = Revenues ÷ Total assets
= 44,200 ÷ 49,014
= 0.90

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 49,014 ÷ 18,013
= 2.72

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.36 × 21.49% × 0.76 × 4.31
= 25.34%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($127.58 × 16.01%$2.86) ÷ ($127.58 + $2.86)
= 13.46%

where:
P0 = current price of share of Qualcomm Inc. common stock
D0 = the last year dividends per share of Qualcomm Inc. common stock
r = required rate of return on Qualcomm Inc. common stock


Dividend growth rate (g) forecast

Qualcomm Inc., H-model

Microsoft Excel
Year Value gt
1 g1 25.34%
2 g2 22.37%
3 g3 19.40%
4 g4 16.43%
5 and thereafter g5 13.46%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 25.34% + (13.46%25.34%) × (2 – 1) ÷ (5 – 1)
= 22.37%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 25.34% + (13.46%25.34%) × (3 – 1) ÷ (5 – 1)
= 19.40%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 25.34% + (13.46%25.34%) × (4 – 1) ÷ (5 – 1)
= 16.43%