Intel shares jump on earnings, but the stock still looks good

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Intel (INTC), the world's biggest chip maker and a component of the Dow Jones Industrial Average ($INDU), saw its shares pop as much as four percent at one point on Wednesday after the company offered a better-than-expected outlook for the fourth quarter.

But if you missed out on the stock's rise, don't fret. Intel's fundamentals are robust and its valuation still reasonable. Even better, its position as an early cycle stock portends further share-price gains.

Semiconductors are one of the most economically sensitive of all industries, so their shares tend to fall well ahead of a recession -- and rebound well ahead of a recovery, too. As such, Intel's fundamentals look good. Kaufman Bros. analyst Shaw Wu said Intel's third-quarter earnings, reported on October 13th, and strong fourth-quarter outlook were driven by demand here in the U.S. and China.

It also doesn't hurt that the majority of Intel's revenue comes from overseas, where the weak U.S. dollar will further boost top-line growth. As for the balance sheet, it is rock solid with $12 billion in cash and just $1.2 billion in long term debt.

Most important, Intel's shares still trade at compelling levels, even after Wednesday's action. The stock's forward price/earnings multiple offers a nifty 15 percent discount to the broader market.

And, hey, Intel pays a dividend, to boot, which is good for a yield of 2.7 percent.

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