Lam Research Corp (LRCX, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $628.72, Lam Research Corp has witnessed a decline of 4.22% over a period, marked against a three-month change of 1.71%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Lam Research Corp is well-positioned for substantial growth in the near future.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here are the key components of Lam Research Corp's GF Score:
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 6/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, but a slightly lower rank in GF Value and momentum, GuruFocus assigned Lam Research Corp the GF Score of 92 out of 100, which signals the highest outperformance potential.
Overview of Lam Research Corp's Business
Lam Research Corp, with a market cap of $83.31 billion, is a leading manufacturer of equipment used to fabricate semiconductors. The company is focused on the etch, deposition, and clean markets, which are key steps in the semiconductor manufacturing process. This focus is particularly relevant for 3D NAND flash storage, advanced DRAM, and leading-edge logic/foundry chipmakers. Lam's flagship Kiyo, Vector, and Sabre products are sold in all major geographies to key customers such as Samsung Electronics, Micron, Intel, SK Hynix, and Taiwan Semiconductor Manufacturing. The company's sales stand at $17.43 billion with an operating margin of 29.93%.
Financial Strength Analysis
According to the Financial Strength rating, Lam Research Corp's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Lam Research Corp stands impressively at 27.98, underscoring its strong capability to cover its interest obligations. With an Altman Z-Score of 9.02, Lam Research Corp exhibits a strong defense against financial distress. Furthermore, with a favorable Debt-to-Revenue ratio of 0.29, Lam Research Corp's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Lam Research Corp's impressive standing among its peers in generating profit. Lam Research Corp's Operating Margin has increased by 3.19% over the past five years, as shown by the following data: 2019: 25.53; 2020: 26.62; 2021: 30.64; 2022: 31.24; 2023: 29.93. Furthermore, Lam Research Corp's strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Lam Research Corp demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 24%, which outperforms better than 75.49% of 869 companies in the Semiconductors industry. Moreover, Lam Research Corp has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 27, and the rate over the past five years is 21. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given Lam Research Corp's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential outperformance. This analysis underscores the company's robust financial health, consistent profitability, and impressive growth trajectory, making it a compelling investment opportunity. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
