Strong Return on Equity
High Gross Profit Margin
Strong Net Profit Margin
Healthy Operating Profit Margin
Strong Liquidity Position
Healthy Interest Coverage
💪 Strong Profitability and Cash Flow
🔍 Competitive Advantages in Process Control
🚀 Strong Growth Outlook
🧠 Innovation in AI and Process Control
High Price-to-Earnings Ratio
Elevated Price-to-Sales Ratio
High Debt Levels
⚠️ Impact of Export Controls
📉 Potential Slowdown in Services Growth
KLA Corporation showcases robust business quality through strong profitability and competitive advantages in process control. Despite facing challenges such as export controls, the company maintains a positive growth outlook driven by innovations in AI and advanced packaging. Overall, KLA is well-positioned for future growth, although short-term challenges in the service segment may impact performance.
Analysis Date: January 30, 2025
Last Updated: March 12, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$926.46
Current Market Price: $574.63
IV/P Ratio: 1.61x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
38.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for KLAC
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (23.96)
P/B ratio ≤ 1.5 (21.44)
Current ratio ≥ 2.0 (2.36x)
Long-term debt < Net current assets (1.07x)
Margin of safety (38.0%)
KLAC does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
KLAC's net profit margin of 29.60% demonstrates its effectiveness in converting revenue into actual profit, reflecting strong operational efficiency.
The operating profit margin of 39.33% indicates that KLAC is effective at managing its operating expenses relative to its revenue.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
94.31%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
5.50%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
60.28%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
29.60%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
KLAC has a current ratio of 2.36, indicating a strong ability to cover short-term liabilities with short-term assets, showing good liquidity.
With an interest coverage ratio of 13.32, KLAC can comfortably meet its interest obligations, suggesting good financial stability.
The debt-to-equity ratio of 1.69 indicates a high reliance on debt for financing, which could pose risks in a rising interest rate environment.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
1.69x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q2 2025
Current Ratio
Current assets divided by current liabilities
2.36x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q2 2025
KLA has demonstrated impressive financial performance with a record revenue of $10.85 billion in 2024, a 12% increase year-over-year. The company maintained industry-leading gross and operating margins at 61% and 41%, respectively. Additionally, free cash flow reached $3.4 billion, showcasing the company’s ability to generate substantial cash.
KLA's differentiated portfolio of solutions positions it well to benefit from increasing complexity and design starts in the semiconductor industry. The company's focus on advanced packaging and AI-related technologies further strengthens its competitive edge in the market.
KLA anticipates a revenue impact of approximately $500 million due to recent U.S. government export controls, with about 70% affecting its systems business. This regulatory environment poses risks to future revenue growth, particularly in the Chinese market.
KLA expects the wafer fab equipment (WFE) market to grow by a mid-single-digit percentage in 2025, with the company anticipating to outperform this growth due to its strong backlog and market position. The demand for advanced packaging and AI technologies is driving KLA’s growth prospects.
KLA's investment in AI and its established capabilities in process control are expected to drive future growth. The company is well-positioned to benefit from the increasing demand for advanced semiconductors used in AI applications, leading to higher value wafer demand and complex designs.
KLA anticipates that the service business growth may be impacted by the export controls and lower access to certain fabs, potentially resulting in growth rates falling below historical averages.