AMD Expected to Outperform Union Pacific: A Comparison of Revenue Growth and Profitability

Advanced Micro Devices (AMD) and Union Pacific (UNP), although from different sectors, are being compared due to their similar revenue base of around $22-24 billion. In terms of potential investment, determining the best stock within certain parameters becomes crucial. Larger profits may indicate greater market power and can play a significant role in the decision-making process. Comparing price-to-sales (P/S) ratios between these different sectors wouldn’t be helpful. Therefore, we analyze their current multiples in comparison to their historical ones to gain a better understanding of their valuations.

Over the past three years, UNP’s stock has experienced a 15% increase, rising from $210 in early January 2021 to approximately $240 as of now. Conversely, AMD’s stock has seen an impressive surge of 95%, climbing from $90 to around $175 during the same period. In comparison, the S&P 500 has increased by roughly 30% over the three-year timeframe.

However, these stock increases have been far from consistent. UNP’s returns were 21% in 2021, -18% in 2022, and 19% in 2023. On the other hand, AMD’s returns in the same years were 57%, -55%, and 128%, respectively. Additionally, when comparing these returns to the S&P 500, we can observe that UNP underperformed the index in 2021 and 2023, while AMD underperformed in 2022.

Beating the S&P 500 consistently has been challenging for individual stocks over recent years, even for prominent companies in the Industrials sector such as Caterpillar, General Electric, and UPS, as well as for megacap stars like Google, Tesla, and Microsoft. In contrast, the Trefis HQ Portfolio, consisting of 30 stocks, has surpassed the S&P 500 every year during the same time frame. The HQ Portfolio stocks provided better returns with lower risk, as demonstrated in the Trefis dashboard.

Considering the current uncertain macroeconomic environment characterized by high oil prices and elevated interest rates, could UNP face a similar situation as in 2021 and 2023 and subsequently underperform the S&P 500 in the next 12 months? Or will we witness a significant surge? While both stocks are expected to trend higher, AMD is more likely to outperform UNP.

Summing up, although AMD is expected to outperform UNP in the next three years, it is essential to evaluate their performances regarding crucial metrics. For further valuable comparisons across industries, visit Trefis.