KLA Corp (KLAC, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $670.45, KLA Corp has witnessed a daily loss of 4.67%, marked against a three-month change of -1.62%. A thorough analysis, underlined by the GF Score, suggests that KLA Corp is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 7/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 7/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability and growth, and a slightly lower GF Value rank, GuruFocus assigned KLA Corp the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding KLA Corp Business
KLA Corp is one of the largest semiconductor wafer fabrication equipment manufacturers in the world, specializing in semiconductor process control. This involves machines that inspect semiconductor wafers during research and development and manufacturing for defects and verify precise measurements. In this market segment, KLA holds a majority share. It also has a small exposure to the etch and deposition segments of the WFE market. Its top customers include the largest chipmakers in the world, such as TSMC and Samsung. With a market cap of $89.09 billion and sales of $10.85 billion, KLA Corp's operating margin stands at an impressive 38.23%.
Financial Strength Breakdown
According to the Financial Strength rating, KLA Corp's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for KLA Corp stands impressively at 12.96, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 6.4, KLA Corp exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.56, KLA Corp's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows KLA Corp's impressive standing among its peers in generating profit. KLA Corp's Operating Margin has increased by 22.32% over the past five years, as shown by the following data: 2020: 30.29; 2021: 35.97; 2022: 39.67; 2023: 38.06; 2024: 37.05. Furthermore, KLA Corp's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2020: 57.81; 2021: 59.93; 2022: 61; 2023: 59.81; 2024: 59.97. This trend underscores the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms KLA Corp's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding, and operating efficiency. KLA Corp's strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, KLA Corp demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 17.4%, which outperforms better than 77.84% of 943 companies in the Semiconductors industry. Moreover, KLA Corp has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 16, and the rate over the past five years is 27.3. This trend accentuates the company's continued capability to drive growth.
Conclusion
With its strong financial strength, impressive profitability, and robust growth metrics, KLA Corp's GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic initiatives and market leadership in semiconductor process control position it well for future growth. As the semiconductor industry continues to evolve, KLA Corp's innovative edge and financial resilience make it a compelling choice for value investors. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
