Advanced Micro Devices Inc (AMD)

Conclusion

Advanced Micro Devices designs semiconductors, including processors, graphics processors and AI accelerators, for data center, client and gaming, and embedded markets. At a price of 508.58 USD on 2026-11-09, the market capitalisation is 834.1 billion USD.

The verdict is overvalued. Four of the five multiples sit above their own ten-year medians: the P/E is 109.5 against a median of 96.2, and the EV/EBITDA is 73.1 against 44.2, a premium of 65.4%. The DCF gives 48.14 USD per share at a discount rate of 17.4%. The fair value band runs from 198.01 to 297.01 USD with a midpoint of 247.51 USD, a margin of safety of -51.3% at the current price. The reverse DCF implied growth is not available because it falls outside the range the model can compute. Revenue grew at a compound rate of 13.6% over three years and 28.8% over five.

What holds the case up is the balance sheet: net debt to EBITDA of -0.61, interest coverage of 48.1, and a Piotroski score of 8 out of 9. What would break it is returns below the cost of capital, with ROIC of 13.45% against a WACC of 17.24%, the share count rising 6.2% a year over five years, and a price-to-sales ratio of 18.36 against a median of 7.67.

Financial health

Financial health is green, held up by good readings on all four measures. The current ratio is 2.72 and the quick ratio 1.72, net debt to EBITDA is -0.61 (a net cash position), interest coverage is 48.1 and debt to equity is 0.13. The Altman Z-score of 20.12 sits in the safe zone, and the model applies because the company is not a financial business. Insolvency risk: low, about 0.01% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31.

Earnings quality

Earnings quality is yellow. Free cash flow conversion is strong at 92.6% on a trailing basis and 146.7% over five years, the accrual ratio of -0.0462 is low, and the Piotroski score is 8 out of 9. Stock-based compensation equals 4.4% of revenue, leaving free cash flow after it at 5.06 billion USD. The share count has grown 6.2% a year over five years, which is dilution rather than buybacks. The Beneish M-score reading is not available. Six of the last eight quarters beat estimates, with an average surprise of 7.3%, and current-year estimates were revised up 6.67% over 90 days, with five upward revisions and none down.

Profitability

Profitability is yellow. Gross margin is 53.7% against a ten-year median of 44.7%, operating margin 17.7% against 7.2%, and net margin 16.8% against 5.4%, with margin stability at 1.05. The decisive number is ROIC of 13.45% against a WACC of 17.24%, with the given ROIC minus WACC value of -3.79%, meaning the company is not earning its cost of capital. The five-year median ROIC is 3.8%. The 2025 DuPont split shows a net margin of 12.5%, an asset turnover of 0.45 and an equity multiplier of 1.22. Leverage therefore plays a small part in the trailing ROE of 11.1%.

Growth

Growth is green. Revenue compound growth is 13.6% over three years, 28.8% over five and 24.1% over ten. Revenue grew in 9 of 10 comparable years. EPS grew at a compound rate of 47.9% over three years but only 5.2% over five, so the recent acceleration is not yet visible across the full period. Free cash flow per share grew 28.7% a year over three years and 45.0% over five.

Valuation

Valuation is red, and the verdict is overvalued. The P/E of 109.5 is 13.8% above its ten-year median of 96.2, the EV/EBITDA of 73.1 is 65.4% above 44.2, the P/FCF of 118.2 is 12.7% above 104.9, and the P/S of 18.36 is 139.4% above 7.67. The P/B of 12.2 is 34.3% below its median of 18.6. The DCF gives 48.14 USD per share at a discount rate of 17.4%, with 20% growth in the first stage and 2.5% in the terminal stage. The terminal value accounts for 34.7% of that figure. The fair value band is 198.01 to 297.01 USD with a midpoint of 247.51 USD, a margin of safety of -51.3%. The fair value from historical multiples is 446.87 USD. This is an order-of-magnitude estimate built on fixed assumptions, not a price target. The company pays no dividend.

Risks

ROIC below WACC is the main risk: each unit of capital currently earns less than it costs, so growth creates value only if returns rise. Share count growth of 6.2% a year dilutes existing holders. Multiples far above their medians leave little room if growth slows, and the beta of 2.542 signals high sensitivity to market moves. Not available: the Beneish M-score reading and the reverse DCF implied growth. This analysis has no debt maturity schedule and no revenue by segment, so it cannot assess refinancing timing or which business lines drive growth.