Stock Analysis: Affordable Growth

Fundamental Rating

LRCX gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 108 industry peers in the Semiconductors & Semiconductor Equipment industry. LRCX has an excellent profitability rating, but there are some minor concerns on its financial health. LRCX is showing excellent growth while it is valued at reasonable prices. Keep and eye on this one! These ratings would make LRCX suitable for growth investing!

1. Profitability

1.1 Basic Checks

LRCX had positive earnings in the past year.

LRCX had a positive operating cash flow in the past year.

LRCX had positive earnings in each of the past 5 years.

Each year in the past 5 years LRCX had a positive operating cash flow.

1.2 Ratios

With an excellent Return On Assets value of 21.64%, LRCX belongs to the best of the industry, outperforming 96.30% 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 95.37% of the companies in the same industry.

LRCX has a Return On Invested Capital of 29.27%. This is amongst the best in the industry. LRCX outperforms 97.22% of its industry peers.

The Average Return On Invested Capital over the past 3 years for LRCX is significantly above the industry average of 11.67%.

		Industry Rank	Sector Rank
ROA	21.64%
ROE	48.75%
ROIC	29.27%

ROA(3y)23.74%

ROA(5y)22.26%

ROE(3y)57.71%

ROE(5y)56.3%

ROIC(3y)31.96%

ROIC(5y)29.69%

1.3 Margins

With an excellent Profit Margin value of 26.49%, LRCX belongs to the best of the industry, outperforming 87.96% of the companies in the same industry.

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 91.67% of its industry peers.

In the last couple of years the Operating Margin of LRCX has grown nicely.

LRCX has a Gross Margin (47.73%) which is in line with its industry peers.

In the last couple of years the Gross Margin of LRCX has remained more or less at the same level.

		Industry Rank	Sector Rank
OM	29.72%
PM (TTM)	26.49%
GM	47.73%

OM growth 3Y-1.8%

OM growth 5Y2.57%

PM growth 3Y-1.32%

PM growth 5Y2.5%

GM growth 3Y0.77%

GM growth 5Y1.07%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

LRCX has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.

The number of shares outstanding for LRCX has been increased compared to 1 year ago.

LRCX has more shares outstanding than it did 5 years ago.

Compared to 1 year ago, LRCX has an improved debt to assets ratio.

2.2 Solvency

An Altman-Z score of 10.20 indicates that LRCX is not in any danger for bankruptcy at the moment.

LRCX has a Altman-Z score of 10.20. This is in the better half of the industry: LRCX outperforms 79.63% 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 74.07% of its industry peers.

LRCX has a Debt/Equity ratio of 0.51. This is a neutral value indicating LRCX is somewhat dependend on debt financing.

LRCX's Debt to Equity ratio of 0.51 is on the low side compared to the rest of the industry. LRCX is outperformed by 75.93% 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.

		Industry Rank	Sector Rank
Debt/Equity	0.51
Debt/FCF	1.23
Altman-Z	10.2

ROIC/WACC2.5

WACC11.72%

2.3 Liquidity

LRCX has a Current Ratio of 2.54. This indicates that LRCX is financially healthy and has no problem in meeting its short term obligations.

With a Current ratio value of 2.54, LRCX perfoms like the industry average, outperforming 43.52% of the companies in the same industry.

A Quick Ratio of 1.73 indicates that LRCX should not have too much problems paying its short term obligations.

With a Quick ratio value of 1.73, LRCX is not doing good in the industry: 64.81% of the companies in the same industry are doing better.

		Industry Rank	Sector Rank
Current Ratio	2.54
Quick Ratio	1.73

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 23.01% over the past year.

LRCX shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 15.80% yearly.

LRCX shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 13.21%.

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.

EPS 1Y (TTM)23.01%

EPS 3Y3.56%

EPS 5Y15.8%

EPS Q2Q%21.01%

Revenue 1Y (TTM)13.21%

Revenue growth 3Y0.63%

Revenue growth 5Y9.08%

Sales Q2Q%16.44%

3.2 Future

LRCX is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 13.52% yearly.

The Revenue is expected to grow by 10.47% on average over the next years. This is quite good.

EPS Next Y26.64%

EPS Next 2Y14.4%

EPS Next 3Y16.9%

EPS Next 5Y13.52%

Revenue Next Year18.75%

Revenue Next 2Y11.39%

Revenue Next 3Y12.14%

Revenue Next 5Y10.47%

3.3 Evolution

The EPS growth rate is stable: in the next years the growth will be about the same than in the last years.

The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

Based on the Price/Earnings ratio of 25.60, the valuation of LRCX can be described as expensive.

LRCX's Price/Earnings ratio is a bit cheaper when compared to the industry. LRCX is cheaper than 74.07% of the companies in the same industry.

When comparing the Price/Earnings ratio of LRCX to the average of the S&P500 Index (29.63), we can say LRCX is valued inline with the index average.

LRCX is valuated rather expensively with a Price/Forward Earnings ratio of 21.69.

LRCX's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. LRCX is cheaper than 75.93% of the companies in the same industry.

The average S&P500 Price/Forward Earnings ratio is at 22.68. LRCX is around the same levels.

		Industry Rank	Sector Rank
PE	25.6
Fwd PE	21.69

4.2 Price Multiples

68.52% of the companies in the same industry are more expensive than LRCX, based on the Enterprise Value to EBITDA ratio.

82.41% of the companies in the same industry are more expensive than LRCX, based on the Price/Free Cash Flow ratio.

		Industry Rank	Sector Rank
P/FCF	27.24
EV/EBITDA	21.91

4.3 Compensation for Growth

LRCX's 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 16.90% in the coming years. This may justify a more expensive valuation.

PEG (NY)0.96

PEG (5Y)1.62

EPS Next 2Y14.4%

EPS Next 3Y16.9%

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5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 1.03%, LRCX has a reasonable but not impressive dividend return.

Compared to an average industry Dividend Yield of 2.23, LRCX pays a better dividend. On top of this LRCX pays more dividend than 82.41% of the companies listed in the same industry.

Compared to an average S&P500 Dividend Yield of 2.27, LRCX's dividend is way lower than the S&P500 average.

		Industry Rank	Sector Rank
Dividend Yield	1.03%

5.2 History

The dividend of LRCX decreases each year by -20.64%.

LRCX has been paying a dividend for at least 10 years, so it has a reliable track record.

LRCX has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.

Dividend Growth(5Y)-20.64%

Div Incr Years10

Div Non Decr Years10

5.3 Sustainability

LRCX pays out 25.22% of its income as dividend. This is a sustainable payout ratio.

DP25.22%

EPS Next 2Y14.4%

EPS Next 3Y16.9%

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Nasdaq / Information Technology / Semiconductors & Semiconductor Equipment

1. Profitability

1.1 Basic Checks

1.2 Ratios

1.3 Margins

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2. Health

2.1 Basic Checks

2.2 Solvency

2.3 Liquidity

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3. Growth

3.1 Past

3.2 Future

3.3 Evolution

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4. Valuation

4.1 Price/Earnings Ratio

4.2 Price Multiples

4.3 Compensation for Growth

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5. Dividend

5.1 Amount

5.2 History

5.3 Sustainability

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