THINK about who AMD is competing with, and you'll quickly realize why AMD almost never shows a profit. They simply do not move the volume needed to pay for the R&D plus make a handsome profit.
"Earnings or cash flow methods are appropriate where the business being valued is earning a fair return on its capital employed and the hypothetical purchaser wishes to acquire the
future indicated earnings [EBITDA] or cash flows [EBIT] generated by the enterprise. The earnings value of a going concern is based on the yield to an investor, at the desired rate of return on his or her investment, having regard to a number of factors."
In other words, the value of a business (which is not a real estate or say an investment holding company) is the Present Value of all future Cash Flows / Earnings before interest and other non-cash expenses, discounted by a rate of return commensurate with the level / amount of risk required to generate such cash flows / earnings.
Net Income or Net Profits is
hardly a relevant metric in finance since it's subject to / affected by:
1) Non-cash expense adjustments such as depreciation/amortization which are an accounting basis and more often than not are not equal to the company's actual tax basis (i.e., there is difference between the amount of depreciation the firm can claim for Tax purposes and what it can claim for accounting purposes on the financial statement);
2) Interest expenses (which vary depending on the capital structure, firm's access to cheap debt, etc.), and for which you account through the discount rate (WACC anyway);
3) Accrual accounting intricacies such as latent tax liabilities, capital loss carryovers, etc..
4) One time non-recurring items (such as NV's charges for bump-gate that are not counted / adjusted for in a financial model
when valuing a business)
In fact, when valuing a business, you may use the Net Income as the
starting line in a bottom up valuation approach, but by itself its value is
completely meaningless. It's really shocking that Wallstreet headlines continue to highlight net income and NOT cash flows / earnings of a firm.....In fact, in business school one of the first things you are taught is that Net Income is generally used by "unsophisticated" investors.
What I am saying is, a firm can have 5-10 years of negative income, but when adjusted for all these items still have positive cash flows