How can an earnings beat send shares lower?

It took a second half of 2014 surge to get shares of Intel (INTC) clearly above where they traded at the end of 2007.

Question: How did it take almost a doubling of earnings and dividends per share, plus 6 1/2 years, just to get INTC shareholders back to even?

Answer: Intel was very overpriced at the start of that period.

At 2007’s peak Intel fetched 23.7x trailing EPS while yielding 1.61%. Business was about to decline significantly, yet the shares were priced for growth.

The Great Recession knocked INTC’s valuation to a much more reasonable, by pre-crash standards, 13.2x recession-lowered numbers. By the time the shares bottomed, in late 2008, Intel had become a high yielder, paying more than 4.5%.

The stock recovered into early 2010 but then plateaued for about four years before heating up. Why did this old tech name become so popular last year when the just reported 2014 EPS were $2.31 versus $2.39 in 2011?

Who knows?

What I can say is that Intel had a post-recession average multiple of 11.3x along with a typical yield of 3.38%. By December of 2014, its P/E had expanded by 45%, to 16.4x, while the stock’s dividend was down to a sub-par, for Intel, 2.69%.

That valuation was unsustainable for a company that is barely expected to grow in 2015. From a still pricey level INTC had regressed to $35.28 by Thursday evening, even after surprising analysts in a positive way.

Making money with Intel since 2008 has been as easy as buying when it’s cheap and selling when it’s dear, based strictly on P/E and yield compared with the stock’s own history.

What does that suggest about the current price?

Intel offers more risk than reward.

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