A lump sum investment in 1990 in the common shares of Intel Corporation
would have produced a compound annual rate of return of 43.44% if the investment
was divested on September 22, 1995. A lump sum investment in 1990 in the
common shares of Hewlett Packard Company would have produced a compound
annual rate of return of 35.44% if the investment was divested on September
22, 1995. The closing prices on September 22, 1995 for Intel and Hewlett
Packard were $US 60 1/2 and $US 82 7/8, respectively.
[Since Sptember 24, 1995, both Intel and Hewlett Packard have had a 2 for 1 stock split.]
Intel Corporation is primarily a manufacturer of microprocessor chips (CPU's) used in today's personal computers. Intel has experienced rapid growth in sales, roughly tripling from 1990 to 1994. Growth in sales from 1993 to 1994 was 31.2%. Growth in sales for the 3 months ended July 2/94 to July 1/95 was 40.6%. Growth in sales for the 6 months ended July 2/94 to July 1/95 was 37.2%. Net profit margin for 1994 was 19.9%. Net profit margin for the 3 months ended April 1/95 was 25%. Net profit margin for the 3 months ended July 1/95 was 22.5%. In other words, the sales growth rate appears to be rising slightly and net profit margin appears to be stable or rising slightly. Intel is trading well below its 52 week high of $US 78-3/8. Intel's P/E ratio is 15.3 to 1 [based on the prorated earnings for the quarter ended July 1/95 (i.e. 60.5/(0.99 X 4))]. I expect an investment in Intel will produce a compound annual rate of return of 22 to 27% over the next eighteen months.
Hewlett Packard Company designs, manufactures, and services electronic products and systems for measurement, computation, and communications. Hewlett Packard 's sales roughly doubled from 1990 to 1994. Growth in sales from 1993 to 1994 was 23.0%. Growth in sales for the 3 months ended July 30/94 to July 30/95 was 27.9%. Growth in sales for the 9 months ended July 30/94 to July 30/95 was 24.5%. Net profit margin for 1994 was 6.40%. Net profit margin for the 3 months ended July 30/95 was 7.44%. Net profit margin for the 3 months ended April 30/95 was 7.76%. In other words the sales growth rate appears to stable or rising slightly and net profit margin appears to be rising slightly. This information appears to be reflected in the current price of the stock , trading near its 52 week high and at a P/E ratio of 19 to 1 [based on the prorated earnings for the quarter ended July 31/95 (i.e 82.875/ (1.09 X 4))] . I expect an investment in Hewlett Packard will produce a compound annual rate of return of 18 to 23% over the next eighteen months.
Click here to view Table 1.1 Comparative
Earnings Performance.
Click here to view Table 1.2 Price Earnings
Ratios.
Click here to view Table 1.3 Record of Common
Dividends.
Click here to view Table 1.4 Financial Position
and Capitalization.
Click here to view Figure 1.1 Balance Sheet
Ratios.
Click here to view Figure 1.2 Earnings and
Retained Earnings Statement Ratios.
Click here to view Figure 1.3 Combined Ratios.
Click
here to view Figure 1.4 Value Ratios.
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