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In this updated coverage research report, we reexamine STMicroelectronics, NV, STM 0.00%↑ an information technology sector enterprise, to see if it continues to meet QualityValue Investing’s (QVI) Real-Time Stock Picks criteria based on QVI’s proprietary checklist analysis of the business’s current wealth and the share price’s present value.
STMicroelectronics | Current Wealth
Value Proposition
STMicroelectronics is a dividend-paying mid-cap stock in the information technology sector’s semiconductors industry. The stock was added to the QVI Stocks Picks on March 26, 2024, at a cost basis of $42.79, adjusted for dividends paid to cash.
STMicroelectronics NV and its subsidiaries design, develop, manufacture, and sell semiconductor products across Europe, the Middle East, Africa, the Americas, and the Asia-Pacific. The company operates through three segments: the Automotive and Discrete Group, the Analog, MEMS, and Sensors Group, and the Microcontrollers and Digital ICs Group. The company serves various markets, including automotive, industrial, personal electronics, communications equipment, and computers and peripherals. STMicroelectronics NV's current formation was established in 1987, incorporated in Schiphol, the Netherlands, and has its headquarters in Geneva, Switzerland.
Economic Moat
Morningstar assigns STMicroelectronics a narrow moat rating due to intangible assets stemming from the firm’s design expertise. These include customer switching costs, as ST’s products are rarely ripped out once designed into a given electronic device, particularly in automotive, industrial, and internet-connected smart device applications.
QVI’s Value Proposition Elevator Pitch for STMicroelectronics
ST is one of the largest chipmakers in Europe, arguably with the most diversified product portfolio in the semiconductor industry. Its near-term revenue and earnings outlook is soft, providing a potential top-pick value opportunity in the tech sector.
QVI’s value proposition rating for STMicroelectronics: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
As the table below shows, STMicroelectronics’ trailing three-year annualized revenue growth was high-double-digit positive and aligned with the S&P 500’s topline growth of +17.20%. However, the company’s negative revenue growth of -11.00% underperformed the broader market’s +16.70% increase for the most recently reported twelve months.
ST had a double-digit net profit margin from a 39.35% gross margin, which aligned with the S&P 500’s net profit margin of 21.00% from a higher gross margin of 54.00%.
Returns on Equity and Invested Capital
STMicroelectronics’ senior management produced a return on equity (ROE) below QVI’s targeted threshold. In addition, the ROE lagged behind the S&P 500’s 56.60%.
Stock buyback programs can elevate ROE. For example, in the period between Jan 27, 2025, and Jan 31, 2025, STMicroelectronics repurchased 559,000 ordinary shares—equal to 0.06% of its issued share capital—at the weighted average price per share of US $23.75 for an overall purchase price of US $13,276,250.
ST’s return on invested capital (ROIC) fell short of QVI’s threshold and lagged behind the broader market’s return. In addition, the company’s ROIC didn’t cover its weighted average cost of capital (WACC), indicating that its senior executives seem challenged by recent capital allocation efforts. (Source of WACC: GuruFocus)
Owners’ Earnings
In an additional evaluation of fundamentals related to shareholder value, ST’s five-year trailing performance in owners’ earnings—comprising annualized EPS growth and dividend rate growth—was in the low double digits. This result reflects a moderate return rate for shareholders from a mid-cap semiconductor company. Notably, its one-year EPS growth was negative at -62.80%.
QVI’s business fundamentals rating for STMicroelectronics: Neutral.
Click or Pinchout to Expand
Next, we’ll examine the company’s enterprise downside risks, the stock price’s present value, including share price downside risks, and the investment thesis, all exclusive to Quality Value Investing’s premium (paying) subscribers.
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Unless noted, all data presented is sourced from Charles Schwab & Co., Yahoo Finance, and STMicroelectronics, NV, as of the market close on February 4, 2025, and is intended for illustrative purposes only.
Disclosure: As of the writing of this research report, I/we hold no beneficial position in STM common shares in our family portfolio. I wrote this report myself, expressing my own opinions. I am not receiving compensation for it other than from subscriptions paid to Substack. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, meaning they are not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider consulting a fee-only certified financial planner, a licensed discount broker/dealer, a flat-fee registered investment adviser, a certified public accountant, or a specialized attorney before making any investment, income tax, or estate planning decisions.
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