Qualcomm Incorporated (QCOM)

Conclusion

Qualcomm designs wireless chips for smartphones, automotive systems and Internet of Things devices, and earns licensing income from its cellular patent portfolio. At 171.47 USD on 9 November 2026, the company has a market capitalisation of 183.1 billion USD and an enterprise value of 190.5 billion USD.

The verdict is overvalued. The margin of safety is -34.7%, with a fair value band of 89.55 to 134.33 USD and a midpoint of 111.94 USD at the current price of 171.47 USD. The price-to-earnings ratio of 13.4 compares with a ten-year median of 19.3, but enterprise value to EBITDA of 22.0 compares with a median of 13.3. The discounted cash flow gives 50.99 USD per share at a discount rate of 13.7%, while the fair value from historical multiples is 172.90 USD. The reverse DCF implies growth of 22.7% a year, against revenue growth of 5.1% over five years and free cash flow per share growth of 1.4% over the same period.

The strongest numbers are the Altman Z-score of 5.63, net debt to EBITDA of 0.86 and free cash flow conversion of 99.7% over five years. The weakest are the return on invested capital of 14.9% against a weighted cost of capital of 12.9%, the operating margin of 20.1% against a ten-year median of 26.2%, and the next-year EPS estimate growth of -3.5%. If these weaken further, the case for the current price has less support.

Financial health

Financial strength is green, held up by a current ratio of 1.86, net debt to EBITDA of 0.86, interest coverage of 12.6x and an Altman Z-score of 5.63. The quick ratio is 0.99 and debt to equity is 0.50. The Altman Z-score of 5.63 sits in the safe zone. The Altman model was designed for manufacturers, and Qualcomm is a semiconductor company, so the reading is indicative. Insolvency risk is low, at about 0.07% by the estimate of the Ohlson model over one to two years. Debt has fallen by 6.6% a year over five years, on a compound basis.

Earnings quality

Earnings quality is green, supported by free cash flow conversion of 99.7% over five years and a share count that fell by 1.4% a year over five years, which points to buybacks. Free cash flow conversion over the last twelve months is 63.5%, and the accrual ratio is 4.5%. Stock-based compensation is 8.0% of revenue, and free cash flow after it is 5.20 billion USD. The Piotroski score is 4 out of 8 evaluable points. The Beneish M-score is not available. The company beat earnings estimates in 7 of the last 8 quarters, by 4.7% on average. Estimate revisions are slightly negative: the current-year estimate changed by -0.2% over 90 days and the next-year estimate by -1.3%.

Profitability

Profitability is yellow. Net margin of 31.6% is well above its ten-year median of 21.1%, but gross margin of 53.1% compares with a median of 56.1%, and operating margin of 20.1% compares with a median of 26.2%. Return on invested capital is 14.9% against a weighted cost of capital of 12.9%, giving a return on invested capital minus cost of capital value of 2.0%, which is neutral. Its five-year median was 25.2%. Return on equity of 44.8% is flattered by leverage: the DuPont split shows a net margin of 31.6%, asset turnover of 0.71 and an equity multiplier of 2.00.

Growth

Growth is yellow. Revenue compound growth is 6.4% over three years, 5.1% over five years and 6.2% over ten years. Earnings per share grew faster, at 25.5% over three years, 10.0% over five years and 12.8% over ten years. Free cash flow per share fell by 2.7% a year over three years, and grew by 1.4% over five years and 5.8% over ten years. Revenue grew in 6 of the last 10 years. Analysts expect next-year EPS to fall by 3.5%, which is the weakest growth signal in the set.

Valuation

Valuation is red, as the verdict is overvalued with a margin of safety of -34.7%. The price-to-earnings ratio is 13.4 against a ten-year median of 19.3, a premium of -30.3%. Enterprise value to EBITDA is 22.0 against a median of 13.3, a premium of 64.9%. Price to free cash flow is 21.2 against a median of 18.6, a premium of 14.1%. Price to book is 6.0 against a median of 8.4, a premium of -28.3%. The discounted cash flow gives 50.99 USD per share at a discount rate of 13.7%, and 37.1% of its value sits in the terminal value. The reverse DCF implies growth of 22.7%, against five-year revenue growth of 5.1%. The fair value band is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped long-term growth, not a price target. The dividend yield is 2.1% and the payout on free cash flow is 44.6%.

Risks

The main risk is that the operating margin, now at 20.1%, stays well below its ten-year median of 26.2%, which would keep return on invested capital close to its cost of capital of 12.9%. A continued fall in estimates, with next-year EPS growth at -3.5%, would weaken the earnings base that supports the price. Free cash flow conversion over the last twelve months of 63.5%, well below the five-year figure of 99.7%, would matter if it persisted. Enterprise value to EBITDA of 22.0 leaves little room if growth slows. The Beneish M-score is not available, so the risk of earnings manipulation cannot be checked. The analysis has limits: it has no debt maturity schedule and no revenue split by segment, so the timing of debt repayments and the mix of the business cannot be assessed.