6 ms·

No, if anything it's overvalued. Previous year's profit was just over $400m. At a 10x multiple that's a $4bn price tag. If you go the year before it was over $6

• togasystems 6y ago
  Revenue is the best indicator for value, not profit which is artificially driven down for tax purposes.
  • vikramkr 6y ago
    Free cash flow is better than revenue - you can play around with accruals in unsavory ways that are harder to pull off with cash.
  • mywittyname 6y ago
    Neither is a great indicator for companies that are experiencing significant growth. ARM Holdings has nearly tripled revenue over the past decade. So you have to weight future growth, as well as potential future market opportunities. ARM + nVidia can be a powerhouse combo, especially in the cloud/server market.
    • giantrobot 6y ago
      NVidia is already an ARM licensee. What does owning ARM holdings give them besides a massive amount of debt? They could license everything ARM owns for decades for less than this buyout would cost.
    • valuearb 6y ago
      ARMs growth has petered out, its market is large and mostly saturated. PCs and servers won’t ship a fraction of the CPUs mobile does.
  • BbzzbB 6y ago
    That's just silly, Wal-Mart would be the most valuable company (while being far from the most profitable) if it held true.
    • nightcracker 6y ago
      I don't think it's that silly to consider Wal-Mart the most valuable company.
      • vikramkr 6y ago
        But its definitely not in any financial metrics. If you own walmart for a year, you'll make around 4 billion, while if you own Google, you'll make around 7. And Google is likely going to be growing faster than Walmart.
      • BbzzbB 6y ago
        If I sell 100 lemonades per day and can't pay my rent, yet my neighbor sells 50 lemonades but manages the business in a way to pay his rent and a salary, how can my business possibly be more valuable? It's a silly example but I don't think it's far fetched. Similarly, Apple is worth far more than 20% of the phone market despite having a grasp on only 20% (give or take, I don't recall the exact number) market shares. There's a reason companies aren't valued based on revenue.
  • burnte 6y ago
    Revenue is a terrible indicator, EBITDA is a good indicator.
• vikramkr 6y ago
  Interest rates are at a record low. Amd is at a pe ratio of like 100, the average pe ratio today is around 15 iirc. With a growth expectation increasing because of apples adoption and all, plus with record low interest rates, a 60x multiple is not insane.
  • burnte 6y ago
    60x might not be impossible, but it's absolutely insane, even if it's common.
    • vikramkr 6y ago
      Nvidia's own pe ratio is around 80 it looks like. Its not actually that insane. Overvalued? Maybe. But all this is saying is that basically, you think that your current required rate of return minus your expected growth rate for ARM is around 1.7%, and your required rate of return is going to be pretty low right now because interest rates are so low. You value future earnings more and you think it's going to grow a lot. You might be wrong, and for a company like AMD with a pe ratio above a hundred you might be betting in an awful lot of growth happening, but in this environment, these are not "insane" numbers.
      • burnte 6y ago
        P/E ratio is not the same as a purchase-valuation multiplier.
        • vikramkr 6y ago
          What you brought up above in this thread is how expensive the acquisition looks as a multiple of earnings. That multiplier is the price of the company vs the earnings for the company, which is literally just a simplified P/E ratio that ignores dilution etc. You may be thinking of revenue multiple based valuation instead?
  • selectodude 6y ago
    Apple has a one time ARM architecture license so that’s not going to be recurring revenue for ARM.