It hasn't been a great morning session for Lam Research investors, who have watched their shares sink by -5.5% to a price of $71.07. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Its Shares Are on Sale but Has an Elevated P/B Ratio:
Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 30.01 and an average price to book (P/B) ratio of 3.91. In contrast, Lam Research has a trailing 12 month P/E ratio of 23.0 and a P/B ratio of 10.84.
Lam Research has moved -3.2% over the last year compared to 23.7% for the S&P 500 — a difference of -26.9%. Lam Research has a 52 week high of $113.0 and a 52 week low of $68.87.
Growing Revenues and Healthy Leverage Levels:
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $9,654 | $10,045 | $14,626 | $17,227 | $17,429 | $14,905 |
| Operating Margins | 26% | 27% | 31% | 31% | 30% | 28% |
| Net Margins | 23% | 22% | 27% | 27% | 26% | 26% |
| Net Income (M) | $2,191 | $2,252 | $3,908 | $4,605 | $4,511 | $3,828 |
| Net Interest Expense (M) | -$18 | -$99 | -$111 | $185 | $186 | n/a |
| Depreciation & Amort. (M) | $309 | $269 | $307 | $334 | $342 | $360 |
| Diluted Shares (M) | 150 | 146 | 142 | 136 | 132 | 132 |
| Earnings Per Share | $13.7 | $15.1 | $26.9 | $32.75 | $33.21 | $29.0 |
| EPS Growth | n/a | 10.22% | 78.15% | 21.75% | 1.4% | -12.68% |
| Avg. Price | $197.45 | $320.09 | $588.23 | $514.65 | $71.53 | $71.53 |
| P/E Ratio | 13.74 | 20.58 | 21.61 | 15.63 | 2.15 | 2.47 |
| Free Cash Flow (M) | $2,873 | $1,923 | $3,239 | $2,554 | $4,677 | n/a |
| CAPEX (M) | $303 | $203 | $349 | $546 | $502 | $397 |
| EV / EBITDA | 10.8 | 16.57 | 18.46 | 13.3 | 2.51 | 2.72 |
| Total Debt (M) | $4,453 | $5,832 | $9,978 | $9,995 | $9,983 | $8,957 |
| Net Debt / EBITDA | 0.51 | 0.73 | 1.02 | 0.96 | 0.79 | 0.71 |
| Current Ratio | 3.3 | 3.19 | 3.13 | 3.01 | 3.06 | 2.82 |
Lam Research benefits from growing revenues and increasing reinvestment in the business, strong operating margins with a stable trend, and an excellent current ratio of 2.82. The company's financial statements show a strong EPS growth trend and healthy leverage levels.
