Apple Inc. (AAPL): Is Micron Technology, Inc. (MU) Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Micron Technology, Inc. (NASDAQ:MU) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

Micron Technology, Inc. (NASDAQ:MU)What we’re looking for
The graphs you’re about to see tell Micron Technology, Inc. (NASDAQ:MU)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at Micron Technology, Inc. (NASDAQ:MU)’s key statistics:

MU Total Return Price Chart

MU Total Return Price data by YCharts

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% 12.4% Fail
Improving profit margin (148.1%) Fail
Free cash flow growth > Net income growth (88%) vs. (154%) Pass
Improving EPS (151.4%) Fail
Stock growth (+ 15%) < EPS growth 71.8% vs. (151.4%) Fail

Source: YCharts. * Period begins at end of Q2 (May) 2010.

MU Return on Equity Chart

MU Return on Equity data by YCharts

Passing Criteria 3-Year* Change Grade
Improving return on equity (140.5%) Fail
Declining debt to equity 60.3% Fail

Source: YCharts. * Period begins at end of Q2 (May) 2010.

How we got here and where we’re going
Things don’t look quite so favorable for Micron Technology, Inc. (NASDAQ:MU) today. The memory-chip manufacturer musters only one out of seven possible passing grades, and even that single pass was more a technicality than a real improvement. High operational costs, and tepid revenue growth since 2010, have shriveled Micron’s net margins, which fell into negative territory some quarters ago. Despite this apparent weakness, Micron Technology, Inc. (NASDAQ:MU)’s shares have marked a solid comeback over the past three years, in stark contrast to the story its fundamentals can tell. Can this growth be sustainable, or will Micron’s weaknesses catch up to it in the end? Let’s dig a little deeper to find out.

My fellow Fool Adrian Campos notes that a sharp transition from DRAM to NAND flash memories, along with an extensive price war, has impeded the progress of most dedicated memory-chip makers. According to IC insights, the NAND chip market is now worth $30 billion, although DRAM is still crucial to the PC market. However, weakening PC demand, and slowing smartphone sales, could cripple Micron Technology, Inc. (NASDAQ:MU)’s long-term revenue and net income growth prospects.