bunhill
Advanced Micro Devices (NASDAQ:AMD) stock has been a big winner over the past few years: Bolstered by the sentiment tailwind associated with GenAI, the shares have returned approximately 63%, compared to a gain of less than 20% for the S&P 500 (SP500), a 3x out-performance. However, investors should note that this bull run has exclusively been driven by multiple expansion. Today, AMD shares are trading at a rich 9x EV/Sales (FWD) and 45x EV/EBITDA, suggesting overvaluation relative to the sector by approximately 240% and 230%, respectively.
Seeking Alpha
In theory, when stocks show such a rich valuation as seen with AMD, then the underlying companies usually show strong earnings growth. However, this has not been the case for AMD. In fact, AMD’s operating income has steadily contracted over the past 3 years: for the trailing twelve months, AMD has generated about $401 million of operating income, compared to $3.6 billion…
