| Snowflake Score | |
|---|---|
| Valuation | 6/6 |
| Future Growth | 1/6 |
| Past Performance | 5/6 |
| Financial Health | 3/6 |
| Dividends | 5/6 |
KLAC Stock Overview
KLA Corporation designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide.
KLA Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$307.60 |
| 52 Week High | US$457.12 |
| 52 Week Low | US$282.83 |
| Beta | 1.35 |
| 1 Month Change | -18.35% |
| 3 Month Change | -9.40% |
| 1 Year Change | -16.76% |
| 3 Year Change | 94.09% |
| 5 Year Change | 190.19% |
| Change since IPO | 13,571.11% |
Recent News & Updates
Here How Much AMAT, KLAC, LRCX, and AMD may be Impacted by Future Licensing Requirements for China
The U.S. administration is may widen the restrictions on exports of semiconductors to China in order to limit China's ability to import technology that can be used against U.S. national security interests. Stocks like AMAT, KLAC, LRCX have 27%+ revenue exposure to the Chinese market which may be affected.
KLA Corp.: Finest Stock In The Semiconductor Industry
Summary One year ago, I gave KLA Corporation a neutral rating based on my DCF analysis and it returned exactly 0% since then. The margin of safety of KLAC improved, and valuation retraced while operating performance improved. Win, win, and win. China has been a significant growth contributor to the semiconductor market, which is why the market is reacting negatively to tech sanctions against it. KLAC is very shareholder-friendly and also wary of the market. It bought back shares and increased dividends with its excess profits from 2022. Exactly one year ago, I wrote about KLA Corporation (KLAC) and gave a neutral rating because my DCF analysis at the time didn't provide sufficient upwards potential. The margin of safety of holding KLAC wasn't large enough to add it as a position to my portfolio. Many semiconductor stocks retraced from their highs. The hardest hit is ASML, followed closely by Applied Materials Inc (AMAT). The Invesco PHLX Semiconductor ETF (SOXQ), which KLAC uses as a comparison in their Annual Report, is down 35% from its highs last year. SOXQ data by YCharts KLAC is the least hit because, even at the time, it had the highest margin of safety. We'll look at the valuations in a moment. It doesn't help ASML and AMAT that their stocks became Twitter darlings, which implies that the crowd doesn't care about its valuation. Before diving into this article, I'd recommend going back a year and reading my thesis - KLA Corporation: A Company I'd Love To Recommend, But I Can't. KLA Corporation - Keyanoush's Article from 2021 (SeekingAlpha) The investor takeaway from a year ago was the following: Looking at KLA's historical price performance, we see that KLA has usually traded anywhere between a PE of 16 and 20. At a current PE of nearly 22, it is more than fairly valued, tilting the risk-reward balance away from reward. With a sufficiently strong pullback into the PE range of 16-17, I would consider KLA a good investment, but I rate it as a hold until then. Contrary to what the Twitter folk tries to establish, valuation matters. It matters a lot in the short term and sufficiently in the long term. To quote the words of Warren Buffett: "The three most important words in investing are margin of safety." The margin of safety a year ago was not large enough to consider KLAC a good investment, even though it has been experiencing significant tailwinds. Thesis The margin of safety of KLAC improved. There are additional geopolitical issues, but for KLAC's instruments, these aren't as impactful as, for example, ASML. While KLAC's stock price is identical to the price in my last article, its fundamentals did not stay identical. In the graph below, I marked the release of my previous article about KLAC. Usually, it trades between a PE of 16 and 20; at the time, it was 22. KLAC Historical Valuation Chart - Fastgraphs (Fastgraphs) KLAC had a great year. Its revenue increased by 33% YoY, gross margin expanded from 59.93% to 61%, operating margin expanded from 35.97% to 39.64%, and net margin expanded from 30.04% to 36.06%. KLAC's operating performance caught up, and all valuation metrics retraced from their all-time highs. KLAC data by YCharts The margin of safety for KLAC improved while the tailwinds remained steady for the next 3-5 years. The CHIPS act adds a tailwind for the company that counters the headwinds from the geopolitical issues with China. KLAC's backlog is elevated, and management points to the higher risk of order modifications, rescheduling, or even cancellation of orders. I rate KLAC as a buy. Full disclosure - I invested in KLAC in the sub $300 area, at which I consider the margin of safety sufficient. Business and Industry Overview Asia is expanding its semiconductor footprint, of which China, Japan, Taiwan, and Korea make up 79% of KLAC's revenue. China makes up 29% and Taiwan 25% of its revenue. This geographic concentration is a risk that investors should know. In his recent article - KLA: Least WFE Company Impacted By Semiconductor Slowdown And US Sanctions, Robert Castellano discusses the geographic concentration of KLAC and its competitors in Asia. The difference in revenue from China between the ASML, AMAT, [[LRCX]], and KLAC is just 3%. China has been rapidly expanding its semiconductor capabilities. The August/September publication of Semiconductor Digest discusses the increasing number of patent applications from China. Patent Applications by Publication Year - SK hynix, Micron - US and China (Semiconductor Digest) China has been a significant growth contributor to the semiconductor market, which is why the market is reacting negatively to tech sanctions against it. On August 26th, the US government told Nvidia (NVDA) about new license requirements for future exports to China, including Hong Kong. Nvidia isn't allowed to export DGX or any other systems incorporating A100 or H100 integrated circuits to China and Russia. The US has already banned ASML from exporting its EUV lithography systems to China to impede China from developing more capabilities in this realm. I think KLAC is less prone to these sanctions because its instruments don't fabricate the chips but are used for quality monitoring and metrology. Another beneficial factor is KLAC's growing service revenue. Metrology and wafer inspection equipment is long-lasting but requires maintenance. In the sub-7nm sector, KLAC is one of the few competitive companies selling equipment capable enough to provide the required services. With manufacturing capacities expanding and more of KLAC's equipment out in the wild, its service revenue is increasing at a constant rate. KLAC Breakdown of Revenue by Major Product and Regions (KLAC Investors Presentation June 2022) Valuation The valuation chart above shows that while the price is identical to when I last published, the valuation metrics, on average, dropped considerably. KLAC has a backlog of $13.11bn in 2022, up 300% from last year. In 2022, KLAC had a record-breaking revenue of $9.2bn. The backlog, considering some cancellations, assures that KLAC's revenue for 2023 will be on a similar level. I am cautious of over-capacity because the semiconductor manufacturing industry experiences counter-cyclical capacity expansion and production cycles. Meaning we're experiencing lower demand for chips while companies expand manufacturing capacity. That leads to overcapacity and then to lower demand for WFE. KLAC is doing, in my opinion, the most logical action with excess capital - returning it to shareholders through dividends and buybacks instead of expanding capacity and running into overcapacity in a year or two. KLAC data by YCharts Compared with AMAT, ASML, and LRCX, KLAC has grown revenue and EBITDA faster than its competitors while being moderately valued. KLAC Price to Free Cash Flow data by YCharts The company's growth and moderate valuation make KLAC the better pick in the semiconductor industry. As mentioned before, its instruments are at lower risk of being sanctioned because they are not manufacturing the chips. The WFE market growth is tempered. Manufacturers are experiencing elevated levels of inventory and cash conversion cycles. I discussed these higher levels in my previous analysis of Qorvo (QRVO) - Qorvo: Around The Sweet Spot - and Skyworks (SWKS) - Skyworks Solutions: Cheap? Yes; Cheap Enough? Maybe. In comparison, process control systems are growing faster than the rest of WFE. KLAC is the market leader in process control systems, especially in the sub-7nm. Like ASML's monopoly on EUV lithography systems, KLAC has a monopoly in the sub-7nm metrology and process control systems. Conclusion KLAC is a decently valued semiconductor WFE manufacturer. It's operating in the market's process control system and metrology segment, which has been outgrowing the overall WFE market. KLAC has a near monopoly in this segment, especially in the sub-7nm inspection segment. Not even ASML or AMAT come close to its expertise in this segment.
Does KLA (NASDAQ:KLAC) Have A Healthy Balance Sheet?
Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously...
Shareholder Returns
| KLAC | US Semiconductor | US Market | |
|---|---|---|---|
| 7D | -8.3% | -6.0% | -5.2% |
| 1Y | -16.8% | -29.7% | -23.0% |
Return vs Industry: KLAC exceeded the US Semiconductor industry which returned -29.7% over the past year.
Return vs Market: KLAC exceeded the US Market which returned -23.1% over the past year.
Price Volatility
| KLAC volatility | |
|---|---|
| KLAC Average Weekly Movement | 6.1% |
| Semiconductor Industry Average Movement | 8.1% |
| Market Average Movement | 6.9% |
| 10% most volatile stocks in US Market | 15.8% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: KLAC is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.
Volatility Over Time: KLAC's weekly volatility (6%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1975 | 14,140 | Rick Wallace | https://www.kla.com |
KLA Corporation designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide. It operates through four segments: Semiconductor Process Control; Specialty Semiconductor Process; PCB, Display and Component Inspection; and Other. The company offers integrated circuit (IC) manufacturing products that comprises wafer inspection and review, and metrology; wafer and substrate defect inspection and metrology; reticle defect inspection and metrology; chemical/materials quality analysis; in situ process management and wafer handling diagnostics for IC and original equipment manufacturer (OEM) manufacturing; software products to provide run-time process control, defect excursion identification, process corrections, and defect classification; and refurbished and remanufactured products.
KLA Fundamentals Summary
| KLAC fundamental statistics | |
|---|---|
| Market Cap | US$43.62b |
| Earnings (TTM) | US$3.32b |
| Revenue (TTM) | US$9.21b |
13.1x
P/E Ratio4.7x
P/S RatioIs KLAC overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| KLAC income statement (TTM) | |
|---|---|
| Revenue | US$9.21b |
| Cost of Revenue | US$3.59b |
| Gross Profit | US$5.62b |
| Other Expenses | US$2.30b |
| Earnings | US$3.32b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 23.42 |
| Gross Margin | 61.00% |
| Net Profit Margin | 36.06% |
| Debt/Equity Ratio | 476.1% |
How did KLAC perform over the long term?
See historical performance and comparisonDividends
1.7%
Current Dividend Yield19%
Payout RatioValuation
Is KLAC undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
6/6Valuation Score 6/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for KLAC?
Other financial metrics that can be useful for relative valuation.
| What is KLAC's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$43.62b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 5.2x |
| Enterprise Value/EBITDA | 11.9x |
| PEG Ratio | 900.1x |
Price to Earnings Ratio vs Peers
How does KLAC's PE Ratio compare to its peers?
| KLAC PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 37.9x | ||
LRCX Lam Research | 11.3x | 0.6% | US$52.1b |
AMAT Applied Materials | 10.9x | 2.8% | US$72.5b |
ENPH Enphase Energy | 186.3x | 24.6% | US$37.9b |
SEDG SolarEdge Technologies | 101.2x | 38.3% | US$14.4b |
KLAC KLA | 13.1x | 0.01% | US$43.6b |
Price-To-Earnings vs Peers: KLAC is good value based on its Price-To-Earnings Ratio (13.1x) compared to the peer average (37.9x).
Price to Earnings Ratio vs Industry
How does KLAC's PE Ratio compare vs other companies in the US Semiconductor Industry?
Price-To-Earnings vs Industry: KLAC is good value based on its Price-To-Earnings Ratio (13.1x) compared to the US Semiconductor industry average (15.7x)
Price to Earnings Ratio vs Fair Ratio
What is KLAC's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 13.1x |
| Fair PE Ratio | 21.2x |
Price-To-Earnings vs Fair Ratio: KLAC is good value based on its Price-To-Earnings Ratio (13.1x) compared to the estimated Fair Price-To-Earnings Ratio (21.2x).
Share Price vs Fair Value
What is the Fair Price of KLAC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: KLAC ($307.6) is trading below our estimate of fair value ($401.74)
Significantly Below Fair Value: KLAC is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.
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Future Growth
How is KLA forecast to perform in the next 1 to 3 years based on estimates from 17 analysts?
Future Growth Score
1/6Future Growth Score 1/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
0.01%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: KLAC's forecast earnings growth (0.01% per year) is below the savings rate (1.9%).
Earnings vs Market: KLAC's earnings (0.01% per year) are forecast to grow slower than the US market (14.7% per year).
High Growth Earnings: KLAC's earnings are forecast to grow, but not significantly.
Revenue vs Market: KLAC's revenue (4.1% per year) is forecast to grow slower than the US market (7.6% per year).
High Growth Revenue: KLAC's revenue (4.1% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: KLAC's Return on Equity is forecast to be very high in 3 years time (128.6%).
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Past Performance
How has KLA performed over the past 5 years?
Past Performance Score
5/6Past Performance Score 5/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
29.7%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: KLAC has high quality earnings.
Growing Profit Margin: KLAC's current net profit margins (36.1%) are higher than last year (30%).
Past Earnings Growth Analysis
Earnings Trend: KLAC's earnings have grown significantly by 29.7% per year over the past 5 years.
Accelerating Growth: KLAC's earnings growth over the past year (59.8%) exceeds its 5-year average (29.7% per year).
Earnings vs Industry: KLAC earnings growth over the past year (59.8%) exceeded the Semiconductor industry 49.3%.
Return on Equity
High ROE: Whilst KLAC's Return on Equity (237.44%) is outstanding, this metric is skewed due to their high level of debt.
Discover strong past performing companies
Financial Health
How is KLA's financial position?
Financial Health Score
3/6Financial Health Score 3/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: KLAC's short term assets ($7.2B) exceed its short term liabilities ($2.9B).
Long Term Liabilities: KLAC's short term assets ($7.2B) do not cover its long term liabilities ($8.3B).
Debt to Equity History and Analysis
Debt Level: KLAC's net debt to equity ratio (282.5%) is considered high.
Reducing Debt: KLAC's debt to equity ratio has increased from 220.6% to 476.1% over the past 5 years.
Debt Coverage: KLAC's debt is well covered by operating cash flow (49.7%).
Interest Coverage: KLAC's interest payments on its debt are well covered by EBIT (24.1x coverage).
Balance Sheet
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Dividend
What is KLA current dividend yield, its reliability and sustainability?
Dividend Score
5/6Dividend Score 5/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
1.69%
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: KLAC's dividend (1.69%) is higher than the bottom 25% of dividend payers in the US market (1.65%).
High Dividend: KLAC's dividend (1.69%) is low compared to the top 25% of dividend payers in the US market (4.57%).
Stability and Growth of Payments
Stable Dividend: KLAC's dividends per share have been stable in the past 10 years.
Growing Dividend: KLAC's dividend payments have increased over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its low payout ratio (19%), KLAC's dividend payments are well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its low cash payout ratio (24.5%), KLAC's dividend payments are well covered by cash flows.
Discover strong dividend paying companies
Management
How experienced are the management team and are they aligned to shareholders interests?
9.1yrs
Average management tenure
CEO
Rick Wallace (62 yo)
16.67yrs
Tenure
US$13,710,388
Compensation
Mr. Richard P. Wallace, also known as Rick, served as Independent Director for Proofpoint, Inc., a security and compliance company until August 31, 2021. He has been the Chief Executive Officer of KLA Corp...
CEO Compensation Analysis
Compensation vs Market: Rick's total compensation ($USD13.71M) is about average for companies of similar size in the US market ($USD13.05M).
Compensation vs Earnings: Rick's compensation has been consistent with company performance over the past year.
Leadership Team
Experienced Management: KLAC's management team is seasoned and experienced (9.1 years average tenure).
Board Members
Experienced Board: KLAC's board of directors are seasoned and experienced ( 13.1 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
| Ownership | Name | Shares | Current Value | Change % | Portfolio % | |
|---|---|---|---|---|---|---|
| 13,595,846 | $4.2b | 0.3% | 0.1% | |||
| 11,124,490 | $3.4b | -4.09% | 0.09% | |||
| 8,456,630 | $2.6b | -2.78% | 0.18% | |||
| 7,181,354 | $2.2b | -2.46% | 2.07% | |||
| 6,198,127 | $1.9b | 34.21% | 0.23% | |||
| 6,021,511 | $1.9b | -3.49% | 0.11% | |||
| 2,651,531 | $815.6m | 5.41% | 0.08% | |||
| 2,639,767 | $812.0m | 1.08% | 0.11% | |||
| 2,555,435 | $786.1m | -20% | 0.15% | |||
| 2,540,437 | $781.4m | -1.09% | 0.45% | |||
| 2,504,462 | $770.4m | 2.4% | 0.24% | |||
| 2,079,168 | $639.6m | 44.32% | 0.28% | |||
| 2,073,667 | $637.9m | 3.81% | 0.15% | |||
| 2,062,479 | $634.4m | -4.99% | 0.58% | |||
| 1,729,991 | $532.1m | -3.48% | 0.11% | |||
| 1,556,900 | $478.9m | 1128.23% | 0.13% | |||
| 1,485,643 | $457.0m | 7.79% | 3.83% | |||
| 1,398,287 | $430.1m | 2.84% | 0.51% | |||
| 1,391,860 | $428.1m | 0% | 0.06% | |||
| 1,249,359 | $384.3m | 1.52% | 0.81% | |||
| 1,164,339 | $358.2m | 4.86% | 0.19% | |||
| 1,145,114 | $352.2m | 0.78% | 0.11% | |||
| 1,140,991 | $351.0m | -30.05% | 0.07% | |||
| 1,119,337 | $344.3m | 26.98% | 0.3% | |||
| 1,064,750 | $327.5m | 20.83% | 0.1% |
Company Information
KLA Corporation's employee growth, exchange listings and data sources
Key Information
- Name: KLA Corporation
- Ticker: KLAC
- Exchange: NasdaqGS
- Founded: 1975
- Industry: Semiconductor Equipment
- Sector: Semiconductors
- Implied Market Cap: US$43.620b
- Shares outstanding: 141.81m
- Website: https://www.kla.com
Number of Employees
Location
- KLA Corporation
- One Technology Drive
- Milpitas
- California
- 95035
- United States
Listings
| Ticker | Exchange | Primary Security | Security Type | Country | Currency | Listed on |
|---|---|---|---|---|---|---|
| KLAC | NasdaqGS (Nasdaq Global Select) | Yes | Common Stock | US | USD | Oct 1980 |
| KLA | DB (Deutsche Boerse AG) | Yes | Common Stock | DE | EUR | Oct 1980 |
| 0JPO | LSE (London Stock Exchange) | Yes | Common Stock | GB | USD | Oct 1980 |
| KLAC | WBAG (Wiener Boerse AG) | Yes | Common Stock | AT | EUR | Oct 1980 |
| KLA | ETLX (Eurotlx) | Yes | Common Stock | IT | EUR | Oct 1980 |
| KLAC * | BMV (Bolsa Mexicana de Valores) | Yes | Common Stock | MX | MXN | Oct 1980 |
| K1LA34 | BOVESPA (Bolsa de Valores de Sao Paulo) | BDR EACH 4 REPR 1 COM | BR | BRL | Jan 2020 |
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/09/24 00:00 |
| End of Day Share Price | 2022/09/23 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2022/06/30 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.