When you look at NASDAQ:LRCX, it's hard to ignore the strong fundamentals, especially considering its likely undervaluation.

Discover LAM RESEARCH CORP (NASDAQ:LRCX), an undervalued stock highlighted by our stock screener. NASDAQ:LRCX showcases solid financial health and profitability while maintaining an appealing valuation. We'll explore the details.

Evaluating Valuation: NASDAQ:LRCX

ChartMill assigns a Valuation Rating to each stock, ranging from 0 to 10. This rating is calculated by analyzing different valuation elements, such as price to earnings and free cash flow, both in absolute terms and relative to the market and industry. In the case of NASDAQ:LRCX, the assigned 10 reflects its valuation:

• The Price/Earnings ratio is 7.68, which indicates a rather cheap valuation of LRCX.
• LRCX's Price/Earnings ratio is rather cheap when compared to the industry. LRCX is cheaper than 99.08% of the companies in the same industry.
• LRCX's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 30.85.
• LRCX is valuated cheaply with a Price/Forward Earnings ratio of 1.63.
• Based on the Price/Forward Earnings ratio, LRCX is valued cheaper than 100.00% of the companies in the same industry.
• LRCX's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 22.51.
• Based on the Enterprise Value to EBITDA ratio, LRCX is valued a bit cheaper than the industry average as 70.64% of the companies are valued more expensively.
• Compared to the rest of the industry, the Price/Free Cash Flow ratio of LRCX indicates a rather cheap valuation: LRCX is cheaper than 83.49% of the companies listed in the same industry.
• The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
• LRCX has an outstanding profitability rating, which may justify a higher PE ratio.
• LRCX's earnings are expected to grow with 48.79% in the coming years. This may justify a more expensive valuation.

Profitability Examination for NASDAQ:LRCX

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NASDAQ:LRCX scores a 9 out of 10:

• The Return On Assets of LRCX (20.77%) is better than 96.33% of its industry peers.
• LRCX has a better Return On Equity (47.89%) than 98.17% of its industry peers.
• With an excellent Return On Invested Capital value of 28.27%, LRCX belongs to the best of the industry, outperforming 98.17% of the companies in the same industry.
• LRCX had an Average Return On Invested Capital over the past 3 years of 31.96%. This is significantly above the industry average of 10.66%.
• LRCX has a better Profit Margin (26.02%) than 87.16% of its industry peers.
• LRCX's Profit Margin has improved in the last couple of years.
• The Operating Margin of LRCX (29.23%) is better than 90.83% of its industry peers.
• In the last couple of years the Operating Margin of LRCX has grown nicely.
• LRCX has a better Gross Margin (47.69%) than 60.55% of its industry peers.

How do we evaluate the Health for NASDAQ:LRCX?

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NASDAQ:LRCX, the assigned 5 for health provides valuable insights:

• LRCX has a debt to FCF ratio of 1.03. This is a very positive value and a sign of high solvency as it would only need 1.03 years to pay back of all of its debts.
• The Debt to FCF ratio of LRCX (1.03) is better than 78.90% of its industry peers.
• Even though the debt/equity ratio score it not favorable for LRCX, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.
• LRCX has a Current Ratio of 2.53. This indicates that LRCX is financially healthy and has no problem in meeting its short term obligations.

Growth Assessment of NASDAQ:LRCX

ChartMill assigns a proprietary Growth Rating to each stock. The score is computed by evaluating various growth aspects, like EPS and revenue growth. We take into account the history as well as the estimated future numbers. NASDAQ:LRCX was assigned a score of 6 for growth:

• LRCX shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 9.08% yearly.
• The Earnings Per Share is expected to grow by 37.29% on average over the next years. This is a very strong growth
• The Revenue is expected to grow by 11.43% on average over the next years. This is quite good.
• When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
• When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

For an up to date full fundamental analysis you can check the fundamental report of LRCX

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.