NXP Semiconductors NV (NASDAQ:NXPI) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $198.05, NXP Semiconductors NV has witnessed a daily gain of 2.09%, marked against a three-month change of 1.79%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that NXP Semiconductors NV is well-positioned for substantial growth in the near future.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
For NXP Semiconductors NV, the GF Score components are as follows:
Financial strength rank: 6/10
Profitability rank: 9/10
Growth rank: 9/10
GF Value rank: 6/10
Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high profitability rank and momentum rank, and a slightly lower financial strength rank, GuruFocus assigned NXP Semiconductors NV the GF Score of 93 out of 100, which signals the highest outperformance potential.
Snapshot of NXP Semiconductors NV's Business
NXP Semiconductors NV, with a market cap of $51.06 billion and sales of $13.18 billion, is a leading supplier of high-performance mixed-signal products. The firm acquired Freescale Semiconductor in 2015 and now has significant market share in the automotive market, where it supplies microcontrollers and analog chips into automotive clusters, powertrains, infotainment systems, and radars. NXP Semiconductors NV also serves industrial and Internet of Things, mobile, and communications infrastructure sectors. The company's operating margin stands at 28.42%.
Financial Strength Analysis
According to the Financial Strength rating, NXP Semiconductors NV's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for NXP Semiconductors NV stands impressively at 8.57, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.85, NXP Semiconductors NV's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows NXP Semiconductors NV's impressive standing among its peers in generating profit. NXP Semiconductors NV Operating Margin has increased (281.21%) over the past five years, as shown by the following data: 2018: 7.54; 2019: 6.94; 2020: 3.53; 2021: 23.35; 2022: 28.73. Furthermore, NXP Semiconductors NV's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 51.57; 2019: 52.02; 2020: 49.18; 2021: 54.84; 2022: 56.93. This trend underscores the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms NXP Semiconductors NV's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency. NXP Semiconductors NV's strong Predictability Rank of 3.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, NXP Semiconductors NV demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 17.2%, which outperforms better than 63.53% of 872 companies in the Semiconductors industry. Moreover, NXP Semiconductors NV has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 26.3, and the rate over the past five years is 6. This trend accentuates the company's continued capability to drive growth.
Given NXP Semiconductors NV's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the company's robust financial health and its potential to deliver substantial returns to investors. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.