Key insights
- An algorithm identified Micron as a top value pick in the S&P 500 on April 1st, based on strong earnings growth and a discounted cash flow analysis, despite a significant price increase. The key takeaway is that earnings growth can outpace price appreciation, making a seemingly expensive stock a value opportunity. This highlights the importance of fundamental analysis in cyclical stocks.
A month ago, on April 1st, my value algorithm flagged Micron as the top value pick in the S&P 500 and I was like, "are you kidding me?" How can a stock that had run from roughly $50 in 2023 to $338 in April 2026 could be a value stock? I genuinely thought it was a bug.
But then i checked the numbers. They held up
My algorithm scores stocks out of 100 across four dimensions. I've posted about the framework in this community prevously, but here's how MU scored on April 1st at $337.84: - Traditional valuation: 16/30. P/E 15.76, P/B 5.25, EV/EBITDA 10.21. Multiples were reasonable but not bargain-bin cheap, which is why this leg lost the most points.
- DCF margin of safety: 20/20. Fair value $586.77 against price $337.84, 82% margin of safety. Maximum points.
- Business quality: 35/35. ROE 40.84%, ROIC 27.69%, current ratio 2.90, D/E 0.15, interest coverage 80x, net margin 41.49%. Perfect score across every quality metric the system measures.
- Growth sustainability: 10/15. Revenue growth 13%, FCF yield 5.8%.
Total: 81/100. Rank 1 in the S&P 500 for April 2026.
What made this counterintuitive was the chart. But underneath it, EPS had gone from -$5.34 in FY2023 to $21.44 on a trailing basis. Earnings were running faster than price. At 16x TTM EPS, Micron was cheaper than it had looked in years, even with the stock up seven-fold from its cycle bottom.
In the 35 days since, MU has moved from $337.84 to $640.20, around +90%.
The lesson: price doesn't determine whether something is a value stock. Earnings do.
Curious how others approach value in cyclical stocks. Not investment advice. DYOR.