NXP Semiconductors has been treading water for the past six months, recording a small return of 4% while holding steady at $237.49. The stock also fell short of the S&P 500’s 10% gain during that period.
Is there a buying opportunity in NXP Semiconductors, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is NXP Semiconductors Not Exciting?
We're swiping left on NXP Semiconductors for now. Here are two reasons you should be careful with NXPI and a stock we'd rather own.
1. Revenue Tumbling Downwards
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a stretched historical view may miss new demand cycles or industry trends like AI. NXP Semiconductors’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.4% over the last two years. 
2. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, NXP Semiconductors’s margin dropped by 10.1 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. NXP Semiconductors’s free cash flow margin for the trailing 12 months was 15.7%.
Final Judgment
NXP Semiconductors isn’t a terrible business, but it doesn’t pass our bar. With its shares trailing the market in recent months, the stock trades at 18× forward P/E (or $237.49 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.
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