LAM RESEARCH CORP (NASDAQ:LRCX), a growth stock which is not overvalued.

Discover LAM RESEARCH CORP (NASDAQ:LRCX), an undervalued growth gem identified by our stock screener. LRCX is shining in terms of growth metrics, and it's also displaying strong financial health and profitability. What's more, it retains an appealing valuation. We'll break it down further.

A Closer Look at Growth for LRCX

Every stock receives a Growth Rating from ChartMill, ranging from 0 to 10. This rating assesses various growth aspects, including historical and projected EPS and revenue growth. LRCX boasts a 7 out of 10:

• The Earnings Per Share has grown by an impressive 23.01% over the past year.
• The Earnings Per Share has been growing by 15.80% on average over the past years. This is quite good.
• The Revenue has grown by 13.21% in the past year. This is quite good.
• Measured over the past years, LRCX shows a quite strong growth in Revenue. The Revenue has been growing by 9.08% on average per year.
• The Earnings Per Share is expected to grow by 13.84% on average over the next years. This is quite good.
• LRCX is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 10.03% yearly.

Evaluating Valuation: LRCX

ChartMill assigns a Valuation Rating to every stock. This score ranges from 0 to 10 and evaluates the different valuation aspects and compares the price to earnings and cash flows, while taking into account profitability and growth. LRCX scores a 6 out of 10:

• LRCX's Price/Earnings ratio is a bit cheaper when compared to the industry. LRCX is cheaper than 73.15% of the companies in the same industry.
• LRCX's Price/Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 29.07.
• Based on the Price/Forward Earnings ratio, LRCX is valued a bit cheaper than the industry average as 75.93% of the companies are valued more expensively.
• 67.59% of the companies in the same industry are more expensive than LRCX, based on the Enterprise Value to EBITDA ratio.
• 84.26% of the companies in the same industry are more expensive than LRCX, based on the Price/Free Cash Flow ratio.
• 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.
• A more expensive valuation may be justified as LRCX's earnings are expected to grow with 16.68% in the coming years.

Health Examination for LRCX

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of LRCX, the assigned 6 reflects its health status:

• LRCX has an Altman-Z score of 9.41. This indicates that LRCX is financially healthy and has little risk of bankruptcy at the moment.
• LRCX has a better Altman-Z score (9.41) than 80.56% of its industry peers.
• The Debt to FCF ratio of LRCX is 1.23, which is an excellent value as it means it would take LRCX, only 1.23 years of fcf income to pay off all of its debts.
• LRCX's Debt to FCF ratio of 1.23 is fine compared to the rest of the industry. LRCX outperforms 73.15% of its industry peers.
• Although LRCX does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
• A Current Ratio of 2.54 indicates that LRCX has no problem at all paying its short term obligations.

Evaluating Profitability: LRCX

ChartMill's Profitability Rating offers a unique perspective on stock analysis, providing scores from 0 to 10. These ratings consider a wide range of profitability metrics and margins, both in comparison to industry peers and on their own merits. For LRCX, the assigned 8 is a significant indicator of profitability:

• Looking at the Return On Assets, with a value of 21.64%, LRCX belongs to the top of the industry, outperforming 95.37% of the companies in the same industry.
• With an excellent Return On Equity value of 48.75%, LRCX belongs to the best of the industry, outperforming 94.44% of the companies in the same industry.
• With an excellent Return On Invested Capital value of 29.27%, LRCX belongs to the best of the industry, outperforming 97.22% of the companies in the same industry.
• The Average Return On Invested Capital over the past 3 years for LRCX is significantly above the industry average of 11.36%.
• The Profit Margin of LRCX (26.49%) is better than 87.04% of its industry peers.
• In the last couple of years the Profit Margin of LRCX has grown nicely.
• LRCX's Operating Margin of 29.72% is amongst the best of the industry. LRCX outperforms 90.74% of its industry peers.
• LRCX's Operating Margin has improved in the last couple of years.

Every day, new Affordable Growth stocks can be found on ChartMill in our Affordable Growth screener.

Check the latest full fundamental report of LRCX for a complete fundamental analysis.

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.