Intel stock: These chips look mighty tasty

— -- Q: Should I sell, hold or buy more Intel intc?

A: In early 2006, many investors abandoned Intel stock and shifted their bets to rival Advanced Micro Devices amd.

Shares of AMD were rocketing, leaving Intel behind as AMD's lineup of microprocessors were well received by power users and trade press. But it didn't take long for Intel to get back on top.

Intel jettisoned several distracting side businesses and put its research muscle into developing the next generation of microprocessors. Now, the tide has turned, and Intel's technology is again leading the industry. Intel also strengthened its relationship with Apple, exposing it to one of the faster-growing PC makers.

All this hasn't been missed on Wall Street. Intel shares have fallen about 25% this year, along with the bulk of tech stocks, but they have held up better than some. Over the past 52 weeks, for instance, Intel shares are a bit better than flat, while AMD shares have fallen nearly 60%.

Do you take the recent weakness in Intel's shares as a chance to buy? To find out, let's put the stock through the four steps we examine:

Step 1: Risk vs. reward. When you take a risk on a stock, you want to make sure you're properly rewarded. Downloading Intel's trading history back to 1980, we see the company generated an average annual compound rate of return of 24.8%. That is a solid return and about 150% greater than the long-term average annual return of the Standard & Poor's 500 index.

To get that return, you accepted considerable risk — standard deviation of 51 percentage points. That's 162% greater than the S&P 500's long-term risk. That's tremendous risk, but you've gotten a fair return for the higher risk you've taken. So far, so good.

Step 2: Measure the stock's discounted cash flow. Some investors decide if a stock is pricey by comparing its current price to the present value of its expected cash flows. It's a complicated analysis made simple with a system from NewConstructs. When we run Intel's stock, we find it's rated "neutral." In other words, the current stock price is roughly equal to what the company is expected to generate in cash over it's lifetime. Using this analysis, it would appear Intel's stock is priced at fair value: not cheap, but not expensive either.

Step 3: Compare the stock's current valuation to its historical range. BetterInvesting's Stock Selection Guide can help. If the analysts are right, and the company grows 15% a year the next five years, that would put the stock in the "buy" range. That's a green light for investors who believe the price-to-earnings ratio will return to historical norms.

Step 4: Check the company's financial health. Before investing in any company, you want to make sure it's in good financial shape. A quick way to check is to look at where it falls on the USA TODAY Stock Meter, which ranks stocks from conservative (1) to aggressive (5). Intel scores a conservative 2.0 here. You can get a Stock Meter score for almost any stock by going to money.usatoday.com and putting the stock's ticker symbol or company name into the Get a Quote box.

The bottom line? There aren't many stocks that get through all four Ask Matt tests without failing any of them. Intel is one. But don't automatically assume this stock is for you. It may be, if you are broadly diversified. But keep in mind that it's volatile and may be too risky for many investors.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Click here to see previous Ask Matt columns.