Think AMD Stock Is Expensive? This Chart Might Change Your Mind

As AMD (NASDAQ:AMD) stock continues to rally, reaching all-time highs, investors may be wondering if the semiconductor giant is becoming overvalued. While AMD's valuation metrics suggest it may be expensive, a closer look at its earnings growth and valuation history might change your perspective.

AMD's current price-to-earnings (P/E) ratio stands at 98.6x, significantly higher than the peer average of 74.8x and the US Semiconductor industry average of 31x. This suggests that AMD's stock price may be overvalued relative to its earnings. However, it's essential to consider that AMD's earnings are forecast to grow at an exceptional rate of 68.33% per year, which could justify its high P/E ratio.



Moreover, AMD's earnings growth is expected to outpace its peers and the broader market. Its earnings are forecast to grow at a rate of 68.33% per year, compared to the US Semiconductors industry average of 36.34% and the US market average of 17.37%. This indicates that AMD is expected to outperform its peers and the broader market in terms of earnings growth.



Additionally, AMD's valuation score of 2/6 indicates that it is significantly undervalued compared to its fair value. This suggests that AMD's stock price may be undervalued relative to its earnings growth potential.

In conclusion, while AMD's P/E ratio may suggest that it is overvalued, its exceptional earnings growth prospects and undervalued valuation score indicate that the stock may still be an attractive investment opportunity. Investors should consider AMD's strong earnings growth potential and valuation history when evaluating its stock price.

Rating: Buy (Revised from Hold).

Important note: Investors are reminded to do their own due diligence and not rely on the information provided as financial advice. The rating is also not intended to time a specific entry/exit at the point of writing unless otherwise specified.