Today we're going to take a look at the well-established Lam Research Corporation (NASDAQ:LRCX). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$652 at one point, and dropping to the lows of US$566. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Lam Research's current trading price of US$570 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Lam Research’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Lam Research worth?
Great news for investors – Lam Research is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $842.37, but it is currently trading at US$570 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Lam Research’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Lam Research generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Lam Research's earnings over the next few years are expected to increase by 43%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since LRCX is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on LRCX for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy LRCX. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
So while earnings quality is important, it's equally important to consider the risks facing Lam Research at this point in time. At Simply Wall St, we found 1 warning sign for Lam Research and we think they deserve your attention.
If you are no longer interested in Lam Research, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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