Brokers' Outlook On ASML Holding NV. (AMS:ASML)

ASML Holding NV. (ENXTAM:ASML) continues to post impressive revenue growth and its prospects have never been brighter. I will touched on some key aspects you should know on a high level, around its financials and growth prospects going forward.

Firstly, a quick intro on the company - ASML Holding N.V. develops, produces, markets, sells, and services advanced semiconductor equipment systems consisting of lithography related systems primarily in the Netherlands, the United States, and Asia. Started in 1984, it operates in Netherlands and is recently valued at €68.42B.

ASML is exceeding expectations, with top-line rocketing up by 33.23% from last financial year , and a bottom line growth of 42.93%. Over the past five years, sales has increased by 7.34%, concurrent with larger capital expenditure, which most recently reached €338.90M. An expected return on investment of 29.53% over the next three years is a result of ASML's reinvestment into the business, according to the consensus of broker analysts covering the stock. Net income is expected to reach €2.43B in the upcoming year, and over the next five years, earnings are predicted to rise at an annual rate of 16.60% on average. These numbers tell me that ASML has a robust history of delivering profit to shareholders, with a disciplined approach to reinvesting into the company, and a bright future relative to its competitors in the industry.

Investors tend to get swept up by a company's growth prospects and promises, but a key element to always look at is its financial health in order to minimize the downside risk of investing. ASML Holdinghas an enviable balance sheet, with high levels of cash generated from its core operating activities (0.7x debt) able to service its borrowings. Furthermore, ASML's debt level is at an appropriate 25.83% of equity, though it has been increasing over the past five years from 16.93%. ASML also generates a sufficient level of earnings which amply covers its annual interest payment 55.82x. The company shows the ability to manage its capital requirements well, increasing my conviction of the sustainability of the business going forward. ASML has high near term liquidity, with short term assets (cash and other liquid assets) amply covering upcoming one-year liabilities, as well as long-term commitments. ASML has managed its cash well at a current level of €3.32B. However, more than a fifth of its total assets are physical assets and inventory, which means that in the worst case scenario, such as a downturn or bankruptcy, a significant portion of assets will be hard to liquidate and redistribute back to investors.

ASML is now trading at €162.30 per share. With 427.24 million shares, that's a €68.42B market cap - which is expensive for a company that has a 5-year cumulative average growth rate (CAGR) of 11.96% (source: analyst consensus). With an upcoming 2018 free cash flow figure of €2.15B, the target price for ASML is €97.05. Therefore, the stock is trading at a premium. Moreover, comparing ASML's current share price to its peers based on its industry and earnings level, it's overvalued by 28.69%, with a PE ratio of 31.35x vs. the industry average of 24.36x.

ASML has a strong investment case. The stock is appealing because of its strong fundamentals - financial health, future outlook and track record. However, at its current share price, right now may not be the best time to invest. For all the charts illustrating this analysis, take a look at the Simply Wall St platform, which is where I've taken my data from.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.