Stock Analysis

KLA's (NASDAQ:KLAC) five-year earnings growth trails the 37% YoY shareholder returns

NasdaqGS:KLAC
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Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. To wit, the KLA Corporation (NASDAQ:KLAC) share price has soared 359% over five years. If that doesn't get you thinking about long term investing, we don't know what will. Also pleasing for shareholders was the 34% gain in the last three months.

The past week has proven to be lucrative for KLA investors, so let's see if fundamentals drove the company's five-year performance.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, KLA achieved compound earnings per share (EPS) growth of 34% per year. That makes the EPS growth particularly close to the yearly share price growth of 36%. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NasdaqGS:KLAC Earnings Per Share Growth June 27th 2025

We know that KLA has improved its bottom line lately, but is it going to grow revenue? Check if analysts think KLA will grow revenue in the future.

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What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of KLA, it has a TSR of 387% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

KLA provided a TSR of 12% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 37% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with KLA , and understanding them should be part of your investment process.

We will like KLA better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Valuation is complex, but we're here to simplify it.

Discover if KLA might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.

About NasdaqGS:KLAC

KLA

Engages in the design, manufacture, and marketing of process control, process-enabling, and yield management solutions for the semiconductor and related electronics industries worldwide.

Solid track record with excellent balance sheet and pays a dividend.

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