Lam Research Corp Valuation – April 2019 #LRCX

Company Profile (excerpt from Reuters): Lam Research Corporation, incorporated on October 8, 1989, is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). The Company operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. The Company’s products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices and networking equipment. The Company’s customer base includes semiconductor memory, foundry and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. The Company offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean. The Company also offers a range of services, including customer service, spares, upgrades, and refurbishment of its deposition, etch and clean products. The Company also provides refurbished legacy products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $29,332,951,738 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.39 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 259.29% Pass
6. Moderate PEmg Ratio PEmg < 20 18.10 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.34 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.39 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.35 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $10.63
MG Growth Estimate 15.00%
MG Value $409.23
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $154.13
MG Value based on 0% Growth $90.35
Market Implied Growth Rate 4.80%
Current Price $192.35
% of Intrinsic Value 47.00%

Lam Research Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.9 in 2015 to an estimated $10.63 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lam Research Corporation revealed the company was trading above its Graham Number of $110.67. The company pays a dividend of $2.55 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 18.1, which was below the industry average of 35.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $14.98.

Lam Research Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $14.98
Graham Number $110.67
PEmg 18.10
Current Ratio 3.39
PB Ratio 5.34
Current Dividend $2.55
Dividend Yield 1.33%
Number of Consecutive Years of Dividend Growth 5

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,355,845,000
Total Current Liabilities $2,166,837,000
Long-Term Debt $1,813,190,000
Total Assets $10,768,458,000
Intangible Assets $1,736,468,000
Total Liabilities $4,927,086,000
Shares Outstanding (Diluted Average) 162,170,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.98
Jun2018 $13.17
Jun2017 $9.24
Jun2016 $5.22
Jun2015 $3.70
Jun2014 $3.62
Jun2013 $0.66
Jun2012 $1.35
Jun2011 $5.79
Jun2010 $2.71
Jun2009 -$2.41
Jun2008 $3.47
Jun2007 $4.85
Jun2006 $2.33
Jun2005 $2.09
Jun2004 $0.54
Jun2003 -$0.06
Jun2002 -$0.71
Jun2001 $0.39
Jun2000 $1.53
Jun1999 -$0.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $10.63
Jun2018 $8.63
Jun2017 $5.74
Jun2016 $3.63
Jun2015 $2.90
Jun2014 $2.61
Jun2013 $1.94
Jun2012 $2.45
Jun2011 $2.96
Jun2010 $1.76
Jun2009 $1.54
Jun2008 $3.23
Jun2007 $2.72
Jun2006 $1.39
Jun2005 $0.76
Jun2004 $0.18
Jun2003 $0.01

Recommended Reading:

Other ModernGraham posts about the company

Lam Research Corp Valuation – June 2018 $LRCX
Lam Research Corp Valuation – September 2017 $LRCX
12 Best Stocks For Value Investors This Week – 7/1/16
Lam Research Corp Valuation – June 2016 $LRCX
19 Best Stocks For Value Investors This Week – 1/9/16

Other ModernGraham posts about related companies

Skyworks Solutions Inc Valuation – March 2019 #SWKS
Garmin Ltd Valuation – March 2019 #GRMN
Hewlett Packard Enterprise Co Valuation – March 2019 #HPE
Fortive Corp Valuation – March 2019 #FTV
Analog Devices Inc Valuation – March 2019 #ADI
IPG Photonics Corp Valuation – March 2019 #IPGP
Micron Technology Inc Valuation – March 2019 #MU
Amphenol Corp Valuation – March 2019 #APH
Xilinx Inc Valuation – March 2019 #XLNX
Western Digital Corp Valuation – March 2019 #WDC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Lam Research Corp Valuation – June 2018 $LRCX

Company Profile (excerpt from Reuters): Lam Research Corporation, incorporated on October 8, 1989, is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). The Company operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. The Company’s products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices and networking equipment. The Company’s customer base includes semiconductor memory, foundry and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. The Company offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean. The Company also offers a range of services, including customer service, spares, upgrades, and refurbishment of its deposition, etch and clean products. The Company also provides refurbished legacy products.

LRCX Chart

LRCX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,177,656,591 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 330.21% Pass
6. Moderate PEmg Ratio PEmg < 20 21.19 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.29 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $8.16
MG Growth Estimate 15.00%
MG Value $314.01
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $118.26
MG Value based on 0% Growth $69.33
Market Implied Growth Rate 6.35%
Current Price $172.85
% of Intrinsic Value 55.05%

Lam Research Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.61 in 2014 to an estimated $8.16 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.35% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lam Research Corporation revealed the company was trading above its Graham Number of $105.52. The company pays a dividend of $1.65 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 21.19, which was below the industry average of 55.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $19.83.

Lam Research Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $19.83
Graham Number $105.52
PEmg 21.19
Current Ratio 2.64
PB Ratio 4.57
Current Dividend $1.65
Dividend Yield 0.95%
Number of Consecutive Years of Dividend Growth 4

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $10,425,797,000
Total Current Liabilities $3,948,420,000
Long-Term Debt $1,862,704,000
Total Assets $13,663,499,000
Intangible Assets $1,825,891,000
Total Liabilities $6,860,444,000
Shares Outstanding (Diluted Average) 179,779,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.74
Jun2017 $9.24
Jun2016 $5.22
Jun2015 $3.70
Jun2014 $3.62
Jun2013 $0.66
Jun2012 $1.35
Jun2011 $5.79
Jun2010 $2.71
Jun2009 -$2.41
Jun2008 $3.47
Jun2007 $4.85
Jun2006 $2.33
Jun2005 $2.09
Jun2004 $0.54
Jun2003 -$0.06
Jun2002 -$0.71
Jun2001 $0.39
Jun2000 $1.53
Jun1999 -$0.98
Jun1998 -$1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.16
Jun2017 $5.74
Jun2016 $3.63
Jun2015 $2.90
Jun2014 $2.61
Jun2013 $1.94
Jun2012 $2.45
Jun2011 $2.96
Jun2010 $1.76
Jun2009 $1.54
Jun2008 $3.23
Jun2007 $2.72
Jun2006 $1.39
Jun2005 $0.76
Jun2004 $0.18
Jun2003 $0.01
Jun2002 -$0.04

Recommended Reading:

Other ModernGraham posts about the company

Lam Research Corp Valuation – September 2017 $LRCX
12 Best Stocks For Value Investors This Week – 7/1/16
Lam Research Corp Valuation – June 2016 $LRCX
19 Best Stocks For Value Investors This Week – 1/9/16
Lam Research Corp Valuation – January 2016 Update $LRCX

Other ModernGraham posts about related companies

Skyworks Solutions Inc Valuation – June 2018 $SWKS
Garmin Ltd Valuation – June 2018 $GRMN
Hewlett Packard Enterprise Co Valuation – June 2018 $HPE
Fortive Corp Valuation – June 2018 $FTV
Analog Devices Inc Valuation – June 2018 $ADI
IPG Photonics Corp Valuation – June 2018 $IPGP
Micron Technology Inc Valuation – May 2018 $MU
Amphenol Corp Valuation – May 2018 $APH
Xilinx Inc Valuation – May 2018 $XLNX
Western Digital Corp Valuation – May 2018 $WDC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Lam Research Corp Valuation – September 2017 $LRCX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Undervalued Stocks for the Enterprising Investor – August 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Lam Research Corp (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). It operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. Its products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices, and networking equipment. Its customer base includes semiconductor memory, foundry, and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. It offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean.

LRCX Chart

LRCX data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – September 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $27,540,115,960 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.10 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 365.68% Pass
6. Moderate PEmg Ratio PEmg < 20 18.99 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.61 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.10 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $8.88
MG Growth Estimate 15.00%
MG Value $341.73
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $128.70
MG Value based on 0% Growth $75.45
Market Implied Growth Rate 5.25%
Current Price $168.59
% of Intrinsic Value 49.33%

Lam Research Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  insufficient earnings stability over the last ten years, and the poor dividend history, and the high PB ratio. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.61 in 2014 to an estimated $8.88 for 2018.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.25% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Lam Research Corporation revealed the company was trading above its Graham Number of $114.82.  The company pays a dividend of $1.65 per share, for a yield of 1%  Its PEmg (price over earnings per share – ModernGraham) was 18.99, which was below the industry average of 41.95, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $20.58.

Lam Research Corporation performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $20.58
Graham Number $114.82
PEmg 18.99
Current Ratio 3.10
PB Ratio 4.61
Current Dividend $1.65
Dividend Yield 0.98%
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $9,142,498,000
Total Current Liabilities $2,950,115,000
Long-Term Debt $0
Total Assets $12,122,765,000
Intangible Assets $1,796,668,000
Total Liabilities $5,305,314,000
Shares Outstanding (Diluted Average) 186,425,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $13.90
Jun2017 $9.24
Jun2016 $5.22
Jun2015 $3.70
Jun2014 $3.62
Jun2013 $0.66
Jun2012 $1.35
Jun2011 $5.79
Jun2010 $2.71
Jun2009 -$2.41
Jun2008 $3.47
Jun2007 $4.85
Jun2006 $2.33
Jun2005 $2.09
Jun2004 $0.54
Jun2003 -$0.06
Jun2002 -$0.71
Jun2001 $0.39
Jun2000 $1.53
Jun1999 -$0.98
Jun1998 -$1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.88
Jun2017 $5.74
Jun2016 $3.63
Jun2015 $2.90
Jun2014 $2.61
Jun2013 $1.94
Jun2012 $2.45
Jun2011 $2.96
Jun2010 $1.76
Jun2009 $1.54
Jun2008 $3.23
Jun2007 $2.72
Jun2006 $1.39
Jun2005 $0.76
Jun2004 $0.18
Jun2003 $0.01
Jun2002 -$0.04

Recommended Reading:

Other ModernGraham posts about the company

Lam Research Corp Valuation – June 2016 $LRCX
19 Best Stocks For Value Investors This Week – 1/9/16
Lam Research Corp Valuation – January 2016 Update $LRCX
13 Best Stocks For Value Investors This Week – 10/3/15
Lam Research Corporation Analysis – October 2015 Update $LRCX

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Skyworks Solutions Inc Valuation – April 2017 $SWKS
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Lam Research Corp Valuation – June 2016 $LRCX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Lam Research Corp (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). It operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. Its products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices, and networking equipment. Its customer base includes semiconductor memory, foundry, and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. It offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,044,160,609 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.96 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 115.06% Pass
6. Moderate PEmg Ratio PEmg < 20 21.70 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.45 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.31 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

LRCX value chart June 2016

EPSmg $3.69
MG Growth Estimate 7.60%
MG Value $87.34
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $53.44
MG Value based on 0% Growth $31.33
Market Implied Growth Rate 6.60%
Current Price $79.96
% of Intrinsic Value 91.55%

Lam Research Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.45 in 2012 to an estimated $3.69 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.6% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Lam Research Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

LRCX value chart June 2016

Net Current Asset Value (NCAV) $14.97
Graham Number $65.83
PEmg 21.70
Current Ratio 2.96
PB Ratio 2.45
Current Dividend $1.20
Dividend Yield 1.50%
Number of Consecutive Years of Dividend Growth 3

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $6,941,565,000
Total Current Liabilities $2,342,186,000
Long-Term Debt $1,407,250,000
Total Assets $10,024,262,000
Intangible Assets $1,999,338,000
Total Liabilities $4,331,923,000
Shares Outstanding (Diluted Average) 174,373,000

Earnings Per Share History

Next Fiscal Year Estimate $5.39
Jun2015 $3.70
Jun2014 $3.62
Jun2013 $0.66
Jun2012 $1.35
Jun2011 $5.79
Jun2010 $2.71
Jun2009 -$2.41
Jun2008 $3.47
Jun2007 $4.85
Jun2006 $2.34
Jun2005 $2.10
Jun2004 $0.59
Jun2003 -$0.06
Jun2002 -$0.71
Jun2001 $0.39
Jun2000 $1.53
Jun1999 -$0.98
Jun1998 -$1.27
Jun1997 -$0.37
Jun1996 $1.56

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.69
Jun2015 $2.90
Jun2014 $2.61
Jun2013 $1.94
Jun2012 $2.45
Jun2011 $2.96
Jun2010 $1.76
Jun2009 $1.54
Jun2008 $3.24
Jun2007 $2.74
Jun2006 $1.40
Jun2005 $0.78
Jun2004 $0.19
Jun2003 $0.01
Jun2002 -$0.04
Jun2001 $0.15
Jun2000 $0.05

Recommended Reading:

Other ModernGraham posts about the company

19 Best Stocks For Value Investors This Week – 1/9/16
Lam Research Corp Valuation – January 2016 Update $LRCX
13 Best Stocks For Value Investors This Week – 10/3/15
Lam Research Corporation Analysis – October 2015 Update $LRCX
Lam Research Corporation Analysis – October 2015 Update $LRCX

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Skyworks Solutions Inc Stock Valuation – February 2016 $SWKS
Analog Devices Inc Stock Valuation – February 2016 $ADI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Lam Research Corp Valuation – January 2016 Update $LRCX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Lam Research Corp (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation (Lam Research) is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company’s products are used primarily in front-end wafer processing, which involves the steps that create the active components of a device and their wiring. It also addresses processes for back-end wafer-level packaging (WLP). In addition, its products are offered for related markets that rely on semiconductor processes and require production-proven manufacturing capability, such as micro-electromechanical systems (MEMS). Its thin film deposition systems form a device’s sub-microscopic layers of conducting (metal) or insulating (dielectric) materials. It is a provider of plasma etch, a process step that selectively removes materials from the wafer to create the features and patterns of a device. Its wet spin clean and plasma-based bevel clean products remove particles, residues and film from the wafer surface before or after adjacent processes.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,707,042,885 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.86 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 115.23% Pass
6. Moderate PEmg Ratio PEmg < 20 21.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.53 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.33 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

LRCX value Chart January 2016

EPSmg $3.69
MG Growth Estimate 7.62%
MG Value $87.57
Opinion Fairly Valued
MG Value based on 3% Growth $53.49
MG Value based on 0% Growth $31.35
Market Implied Growth Rate 6.29%
Current Price $77.73
% of Intrinsic Value 88.76%

Lam Research Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.45 in 2012 to an estimated $3.69 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 6.29% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Lam Research Corporation (LRCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

LRCX Charts January 2016

Net Current Asset Value (NCAV) $13.07
Graham Number $64.17
PEmg 21.07
Current Ratio 2.86
PB Ratio 2.53
Dividend Yield 1.24%
Number of Consecutive Years of Dividend Growth 3

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Total Current Assets $6,515,981,000
Total Current Liabilities $2,281,941,000
Long-Term Debt $1,400,615,000
Total Assets $9,594,431,000
Intangible Assets $2,076,164,000
Total Liabilities $4,236,276,000
Shares Outstanding (Diluted Average) 174,374,000

Earnings Per Share History

Next Fiscal Year Estimate $5.40
Jun15 $3.70
Jun14 $3.62
Jun13 $0.66
Jun12 $1.35
Jun11 $5.79
Jun10 $2.71
Jun09 -$2.41
Jun08 $3.47
Jun07 $4.85
Jun06 $2.33
Jun05 $2.09
Jun04 $0.54
Jun03 -$0.06
Jun02 -$0.71
Jun01 $0.39
Jun00 $1.53
Jun99 -$0.98
Jun98 -$1.27
Jun97 -$0.37
Jun96 $1.32

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.69
Jun15 $2.90
Jun14 $2.61
Jun13 $1.94
Jun12 $2.45
Jun11 $2.96
Jun10 $1.76
Jun09 $1.54
Jun08 $3.23
Jun07 $2.72
Jun06 $1.39
Jun05 $0.76
Jun04 $0.18
Jun03 $0.01
Jun02 -$0.04
Jun01 $0.15
Jun00 $0.04

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 10/3/15
Lam Research Corporation Analysis – October 2015 Update $LRCX
Lam Research Corporation Analysis – June 2015 Update $LRCX
Lam Research Corporation Quarterly Valuation – March 2015 $LRCX
27 Companies in the Spotlight This Week – 12/20/14

Other ModernGraham posts about related companies

Arrow Electronics Inc Valuation – December 2015 Update $ARW
TE Connectivity Ltd Valuation – December 2015 Update $TEL
Broadcom Corp Valuation – November 2015 Update $BRCM
SanDisk Corp Valuation – November 2015 Update $SNDK
Corning Inc Valuation – November 2015 Update $GLW
Intel Corp Valuation – November 2015 Update $INTC
FLIR Systems Inc. Valuation – November 2015 Update $FLIR
NVIDIA Corporation Valuation – November 2015 Update $NVDA
FMC Technologies Inc. Valuation – November 2015 Update $FTI
Applied Materials Inc Valuation – November 2015 Update $AMAT

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

 

Lam Research Corporation Analysis – October 2015 Update $LRCX

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – September 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Lam Research Corporation (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation (Lam Research) is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company’s products are used primarily in front-end wafer processing, which involves the steps that create the active components of a device and their wiring. It also addresses processes for back-end wafer-level packaging (WLP). In addition, its products are offered for related markets that rely on semiconductor processes and require production-proven manufacturing capability, such as micro-electromechanical systems (MEMS). Its thin film deposition systems form a device’s sub-microscopic layers of conducting (metal) or insulating (dielectric) materials. It is a provider of plasma etch, a process step that selectively removes materials from the wafer to create the features and patterns of a device. Its wet spin clean and plasma-based bevel clean products remove particles, residues and film from the wafer surface before or after adjacent processes.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of LRCX – October 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,020,835,388 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.38 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 101.02% Pass
6. Moderate PEmg Ratio PEmg < 20 18.88 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.23 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.38 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.28 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

LRCX value Chart October 2015

EPSmg $3.41
MG Growth Estimate 5.90%
MG Value $69.22
Opinion Fairly Valued
MG Value based on 3% Growth $49.43
MG Value based on 0% Growth $28.97
Market Implied Growth Rate 5.19%
Current Price $64.37
% of Intrinsic Value 92.99%

Lam Research Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years and the short dividend history.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.45 in 2012 to an estimated $3.41 for 2016.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.19% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Lam Research Corporation (LRCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

LRCX Charts October 2015

Net Current Asset Value (NCAV) $11.38
Graham Number $57.50
PEmg 18.88
Current Ratio 2.38
PB Ratio 2.23
Dividend Yield 1.30%
Number of Consecutive Years of Dividend Growth 3

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $6,270,849,000
Total Current Liabilities $2,631,361,000
Long-Term Debt $1,001,382,000
Total Assets $9,364,648,000
Intangible Assets $2,115,649,000
Total Liabilities $4,261,504,000
Shares Outstanding (Diluted Average) 176,575,000

Earnings Per Share History

Next Fiscal Year Estimate $4.56
Jun15 $3.70
Jun14 $3.62
Jun13 $0.66
Jun12 $1.35
Jun11 $5.79
Jun10 $2.71
Jun09 -$2.41
Jun08 $3.47
Jun07 $4.85
Jun06 $2.34
Jun05 $2.10
Jun04 $0.59
Jun03 -$0.06
Jun02 -$0.71
Jun01 $0.39
Jun00 $1.53
Jun99 -$0.98
Jun98 -$1.27
Jun97 -$0.37
Jun96 $1.56

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.41
Jun15 $2.90
Jun14 $2.61
Jun13 $1.94
Jun12 $2.45
Jun11 $2.96
Jun10 $1.76
Jun09 $1.54
Jun08 $3.24
Jun07 $2.74
Jun06 $1.40
Jun05 $0.78
Jun04 $0.19
Jun03 $0.01
Jun02 -$0.04
Jun01 $0.15
Jun00 $0.05

Recommended Reading:

Other ModernGraham posts about the company

Lam Research Corporation Analysis – June 2015 Update $LRCX
Lam Research Corporation Quarterly Valuation – March 2015 $LRCX
27 Companies in the Spotlight This Week – 12/20/14
Lam Research Corporation Quarterly Valuation – December 2014 $LRCX
17 Companies in the Spotlight This Week – 9/20/2014

Other ModernGraham posts about related companies

NetApp Inc. Analysis – September 2015 Update $NTAP
EMC Corporation Analysis – September 2015 Update $EMC
Analog Devices Inc. Analysis – September 2015 Update $ADI
Garmin Limited Analysis – September 2015 Update $GRMN
Texas Instruments Inc Analysis – September 2015 Update $TXN
My Personal Holdings: Apple Inc. – September 2015 Update $AAPL
The Best Stocks of the IT Hardware Industry – September 2015
Seagate Technology PLC Analysis – September 2015 Update $STX
Microchip Technology Inc. Analysis – September 2015 Update $MCHP
Seagate Technology PLC Analysis – September 2015 Update $STX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Lam Research Corporation Analysis – June 2015 Update $LRCX

220px-Lam_Research_logo.svgLam Research Corporation (LRCX) has shown some earnings growth over the last few years and pays a healthy dividend, which may garner some attention from prospective investors. In addition, CEO Martin Anstice believes the company has growth potential through market share gains, a quantitative factor that will intrigue investors, but it is critical to first conduct a quantitative analysis of the company.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

LRCX Chart

LRCX data by YCharts

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least one-third over the last 10 years, using three-year averages at the beginning and end of the period – FAIL
  6. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – FAIL
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests to be suitable for a Defensive Investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – PASS
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $83.44
MG Value $32.39
MG Opinion Overvalued
Value Based on 3% Growth $45.48
Value Based on 0% Growth $26.66
Market Implied Growth Rate 9.05%
Net Current Asset Value (NCAV) $10.82
PEmg 26.60
Current Ratio 3.49
PB Ratio 2.91

Balance Sheet – March 2015

Current Assets $6,061,000,000
Current Liabilities $1,735,000,000
Total Debt $1,831,000,000
Total Assets $9,239,000,000
Intangible Assets $2,243,000,000
Total Liabilities $4,141,000,000
Outstanding Shares 177,500,000

Earnings Per Share

2015 (estimate) $4.42
2014 $3.62
2013 $0.66
2012 $1.35
2011 $5.79
2010 $2.71
2009 -$2.41
2008 $3.47
2007 $4.85
2006 $2.33
2005 $2.09

Earnings Per Share – ModernGraham

2015 (estimate) $3.14
2014 $2.61
2013 $1.94
2012 $2.45
2011 $2.96
2010 $1.76

Dividend History

LRCX Dividend Chart

LRCX Dividend data by YCharts

Competitive Comparison

Lam Research is pretty comparable in valuation when compared to some other companies in the IT Hardware industry. For example, a ModernGraham valuation of Applied Materials Inc. (AMAT) indicates that company is suitable for the Enterprising Investor but overvalued at the present time.

Conclusion

Lam Research passes the initial requirements of the Enterprising Investor but not the Defensive Investor. Specifically, the Defensive Investor is concerned by the insufficient earnings growth or stability over the last ten years, the short dividend history, and the high PEmg and PB ratios while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $2.96 in 2011 to an estimated $3.14 for 2015. This level of demonstrated growth does not support the market’s implied estimate for annual earnings growth of 9.05% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 1.22% annually, but the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, and returns an estimate of intrinsic value well below the current price, indicating that Lam Research is overvalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Lam Research Corporation Quarterly Valuation – March 2015 $LRCX

220px-Lam_Research_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – March 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Lam Research Corporation (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation (Lam) is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). Lam’s products are designed to build devices that are used in various electronic products, including cell phones, tablets, computers, storage devices and networking equipment. The Company’s customer base includes semiconductor memory, foundry and integrated device manufacturers (IDMs) that make various products, such as DRAM, NAND memory and logic devices. Lam offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and wafer cleaning. These processes, which are repeated numerous times during the wafer fabrication cycle, are utilized to manufacture every type of semiconductor device.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $79.23
MG Value $30.31
MG Opinion Overvalued
Value Based on 3% Growth $44.76
Value Based on 0% Growth $26.24
Market Implied Growth Rate 8.58%
Net Current Asset Value (NCAV) $10.20
PEmg 25.67
Current Ratio 2.88
PB Ratio 2.80

Balance Sheet – December 2014

Current Assets $4,915,000,000
Current Liabilities $1,709,000,000
Total Debt $831,000,000
Total Assets $8,111,000,000
Intangible Assets $2,282,000,000
Total Liabilities $3,110,000,000
Outstanding Shares 177,000,000

Earnings Per Share

2015 (estimate) $4.27
2014 $3.62
2013 $0.66
2012 $1.35
2011 $5.79
2010 $2.71
2009 -$2.41
2008 $3.47
2007 $4.85
2006 $2.33
2005 $2.09

Earnings Per Share – ModernGraham

2015 (estimate) $3.09
2014 $2.61
2013 $1.94
2012 $2.45
2011 $2.96
2010 $1.76

Dividend History

Conclusion:

Lam Research Corporation is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings growth or stability over the last ten years, the lack of dividends, and the high PEmg and PB ratios, while the Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.96 in 2011 to only $3.09 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.58% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Lam Research Corporation (LRCX) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Lam Research Corporation (LRCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Lam Research Corporation (LRCX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Lam Research Corporation Quarterly Valuation – December 2014 $LRCX

220px-Lam_Research_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – December 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Lam Research Corporation (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation (Lam Research), is a supplier of wafer fabrication equipment and services to the worldwide semiconductor industry. Lam Research designs, manufactures, markets, refurbish, and services semiconductor processing equipment used in the fabrication of integrated circuit. In addition, it offers a broad portfolio of single-wafer clean technologies. Its Customer Support Business Group (CSBG) provides products and services to maximize installed equipment performance and operational efficiency. It offers a range of services including customer service, spares, upgrades, refurbishment of its etch, deposition, photoresist strip, and clean products. The Company also develops manufactures, sells and supports equipment used in grinding, lapping and polishing precision parts used in a spectrum of industrial applications.In June 2012, Lam Research completed its merger with Novellus Systems, Inc.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $78.38
MG Value $32.67
MG Opinion Overvalued
Value Based on 3% Growth $45.58
Value Based on 0% Growth $26.72
Market Implied Growth Rate 8.22%
Net Current Asset Value (NCAV) $9.53
PEmg 24.94
Current Ratio 2.93
PB Ratio 2.84

Balance Sheet – September 2014

Current Assets $4,691,000,000
Current Liabilities $1,600,000,000
Total Debt $824,000,000
Total Assets $7,894,000,000
Intangible Assets $2,322,000,000
Total Liabilities $3,003,000,000
Outstanding Shares 177,100,000

Earnings Per Share

2015 (estimate) $4.44
2014 $3.62
2013 $0.66
2012 $1.35
2011 $5.79
2010 $2.71
2009 -$2.41
2008 $3.47
2007 $4.85
2006 $2.33
2005 $2.09

Earnings Per Share – ModernGraham

2015 (estimate) $3.14
2014 $2.61
2013 $1.94
2012 $2.45
2011 $2.96
2010 $1.76

Dividend History

Conclusion:

Lam Research Corporation qualifies for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the lack of sufficient earnings growth or stability over the last ten years, short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $2.96 in 2011 to only an estimated $3.14 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.22% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

Be sure to check out previous ModernGraham valuations of Lam Research Corporation (LRCX) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Lam Research Corporation (LRCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Lam Research Corporation (LRCX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Lam Research Corporation Quarterly Stock Valuation – September 2014 $LRCX

220px-Lam_Research_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Lam Research Corporation (LRCX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Lam Research Corporation (Lam Research), is a supplier of wafer fabrication equipment and services to the worldwide semiconductor industry. Lam Research designs, manufactures, markets, refurbish, and services semiconductor processing equipment used in the fabrication of integrated circuit. In addition, it offers a broad portfolio of single-wafer clean technologies. Its Customer Support Business Group (CSBG) provides products and services to maximize installed equipment performance and operational efficiency. It offers a range of services including customer service, spares, upgrades, refurbishment of its etch, deposition, photoresist strip, and clean products. The Company also develops manufactures, sells and supports equipment used in grinding, lapping and polishing precision parts used in a spectrum of industrial applications.In June 2012, Lam Research completed its merger with Novellus Systems, Inc.
LRCX Chart

LRCX data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period -FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $71.65
MG Value $59.86
MG Opinion Overvalued
Value Based on 3% Growth $37.78
Value Based on 0% Growth $22.15
Market Implied Growth Rate 9.50%
Net Current Asset Value (NCAV) $11.21
PEmg 27.50
Current Ratio 3.02
PB Ratio 2.31

Balance Sheet – 6/29/2014

Current Assets $4,783,700,000
Current Liabilities $1,582,000,000
Total Debt $817,200,000
Total Assets $7,993,300,000
Intangible Assets $2,360,300,000
Total Liabilities $2,963,600,000
Outstanding Shares 162,350,000

Earnings Per Share

2014 $3.62
2013 $0.66
2012 $1.35
2011 $5.79
2010 $2.71
2009 -$2.41
2008 $3.47
2007 $4.85
2006 $2.34
2005 $2.10

Earnings Per Share – ModernGraham

2014 $2.61
2013 $1.94
2012 $2.45
2011 $2.96
2010 $1.76
2009 $1.54

Dividend History
LRCX Dividend Chart

LRCX Dividend data by YCharts

Conclusion:

Lam Research is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the short dividend history, insufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.76 in 2010 to $2.61 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 9.50% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Lam Research Corporation (LRCX)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Lam Research Corporation (LRCX) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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