Lam Research LRCX
What does Lam Research do?
Lam Research develops, manufactures, markets and services equipment for wafer fabrication in the semiconductor industry. Its portfolio includes systems for deposition processes such as atomic layer deposition, chemical vapor deposition and electrochemical deposition, for example for tungsten, molybdenum and copper metallization. It also offers etch systems, which precisely carve out the finest structures in chips, as well as equipment for cleaning and other process steps.
The company earns money from selling new equipment to chipmakers, for example in memory, logic and foundry. In addition there is a service business with spare parts, upgrades, maintenance and refurbished systems, which is tied to the installed base. The customer base is highly concentrated and geographically broadly spread, with a heavy weighting toward Asian markets. In terms of competitive position, Lam Research is among the leading equipment suppliers, particularly in etch and deposition, and competes mainly with a few large international providers. Technological closeness to customers and high switching costs support its position.
Score profile
Rank vs. Semiconductor Equipment & Materials (24 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Lam Research ranks among the best in the group Semiconductor Equipment & Materials (8.3/10). On growth, the company ranks above average in the group Semiconductor Equipment & Materials (7.5/10). On valuation (higher = cheaper), the stock ranks in the middle in the group Semiconductor Equipment & Materials (4.4/10). On financial strength, Lam Research ranks in the middle in the group Semiconductor Equipment & Materials (4.9/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 18.2x | 20.1x | better than 60 % |
| Trailing P/E | 33.1x | 37.3x | better than 61 % |
| PEG ratio | 0.9x | 1.2x | better than 59 % |
| EV/EBITDA | 27.0x | 25.3x | better than 43 % |
| Price/sales | 10.6x | 5.3x | better than 15 % |
| Price/book | 20.0x | 3.5x | better than 7 % |
| Revenue growth | 54.4% | 28.6% | better than 77 % |
| Earnings growth | 76.6% | 38.9% | better than 73 % |
| Gross margin | 51.1% | 46.9% | better than 69 % |
| Operating margin | 40.0% | 20.9% | better than 85 % |
| Net margin | 32.3% | 11.3% | better than 85 % |
| Return on equity | 70.1% | 9.7% | better than 94 % |
| Debt/equity | 26.9% | 28.5% | better than 56 % |
| Current ratio | 2.5x | 3.3x | better than 27 % |
| Free cash flow yield | 1.6% | 1.4% | better than 65 % |
| Dividend yield | 0.6% | 0.6% | – |
| Payout ratio | 16.5% | 16.5% | – |
| Beta | 2.01 | 1.70 | – |
Valuation: what is Lam Research worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Lam Research a model range of 97.38 USD to 246.04 USD per share.
30 analysts, average rating “Strong buy”, average price target 363.03 USD (+63.4%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Chipmakers' willingness to invest in new manufacturing capacity and technology transitions largely determines demand for equipment.
- Increasing manufacturing complexity, for example in three-dimensional memory and logic structures, raises the need for etch and deposition steps.
- The growing installed base generates recurring revenue from service, spare parts and upgrades.
Risks
- The semiconductor industry is cyclical, and investment cuts by customers quickly feed through to order intake and earnings.
- Export restrictions and geopolitical tensions can limit access to important sales markets, particularly in Asia.
- A few large customers have considerable negotiating power, and technological lag behind competitors could cost market share.
What to look for with Lam Research
Order intake relative to revenue shows early on whether demand in the cyclical equipment business is strengthening or weakening.