Lam Research Corp (LRCX)

Conclusion

Lam Research designs, manufactures and services semiconductor processing equipment, including etch, deposition and clean systems used to fabricate integrated circuits, with customers in the United States, China, Korea, Taiwan and Japan. At 221.31 USD on 9 November 2026, the company has a market capitalisation of 276.95 billion USD.

The verdict is overvalued. The price of 221.31 USD is well above the fair value band of 81.66 to 122.50 USD, with a midpoint of 102.08 USD and a margin of safety of -53.9%. Today's multiples are far above their own ten-year medians: P/E 32.8 against 20.6, EV/EBITDA 26.9 against 16.4, and price to free cash flow 41.9 against 24.5. The DCF gives 74.60 USD per share at a discount rate of 14.9%, while the fair value from historical multiples is 129.57 USD. The reverse DCF implies growth of 28.5% a year, against revenue growth of 9.7% and free cash flow per share growth of 11.7% over five years.

The strongest numbers are ROIC of 83.7% against a WACC of 14.8%, a net cash position with net debt to EBITDA of -0.36, and free cash flow conversion of 78.3% on a trailing basis. The weakest are the price to sales multiple of 10.6 against a median of 5.3, the implied growth of 28.5% against 9.7% delivered, and a beta of 2.01, which points to large price swings.

Financial health

Financial strength is green, held up by a net cash position, interest coverage and an Altman Z-score well inside the safe zone. The current ratio is 2.48 and the quick ratio 1.79. Net debt to EBITDA is -0.36, debt to equity is 0.27 and interest coverage is 83.4x. The Altman Z-score is 18.03, in the safe zone. The Altman model was designed for manufacturers, and this company is one. Insolvency risk is low, about 0.04% by the estimate of the Ohlson model over one to two years. Debt has fallen over five years, with a debt to revenue growth figure of -13.5%.

Earnings quality

Earnings quality is green, supported by a Piotroski score of 8 out of 9 and by a share count that has shrunk. Free cash flow conversion is 78.3% on a trailing basis and 85.2% over five years. The accrual ratio is 6.3%. Stock-based compensation is 1.6% of revenue, and free cash flow after it is 6.21 billion USD on a trailing basis. The share count has fallen at a compound rate of 2.8% over five years, which points to buybacks. The company beat earnings estimates in all 8 of the last quarters, with an average surprise of 5.8%. Estimates for the current year have risen 17.5% over 90 days, with 19 upward and 8 downward revisions in the last 30 days. The Beneish M-score is not available.

Profitability

Profitability is green. Margins sit above their ten-year medians: gross margin 51.1% against 46.2%, operating margin 37.0% against 29.4%, and net margin 32.3% against 25.8%. Operating margin has been stable, with a variability measure of 10.9%. ROIC is 83.7% against a WACC of 14.8%, a difference of 68.9 percentage points, and the five-year median ROIC is 62.0%. Return on equity is 60.8%. The DuPont split shows a net margin of 31.3%, an asset turnover of 0.99 and an equity multiplier of 1.89, so the high return on equity comes mainly from margins and only modestly from leverage.

Growth

Growth is green, with compound revenue growth of 10.1% over three years, 9.7% over five and 14.7% over ten. Earnings per share compounded at 20.2% over three years, 16.5% over five and 27.1% over ten. Free cash flow per share grew at 4.1% over three years, 11.7% over five and 19.2% over ten. Revenue rose in 8 of the last 10 comparable years. Analysts expect next-year earnings per share to grow 26.8%, which is well above the five-year revenue growth rate and is the main growth assumption behind the current price.

Valuation

Valuation is red. Every multiple trades above its ten-year median: P/E 32.8 against 20.6, a premium of 58.8%; EV/EBITDA 26.9 against 16.4, a premium of 63.7%; price to free cash flow 41.9 against 24.5, a premium of 70.8%; price to sales 10.6 against 5.3, a premium of 98.7%; and price to book 19.9 against 10.8, a premium of 84.2%. The DCF gives 74.60 USD per share at a discount rate of 14.9%, with growth of 14.7% in the first stage and 2.5% in the terminal stage. The fair value band runs from 81.66 to 122.50 USD, with a midpoint of 102.08 USD and a margin of safety of -53.9%. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The reverse DCF implies growth of 28.5% against 9.7% revenue growth over five years. The dividend yield is 0.47%, and dividends absorb 19.7% of free cash flow.

Risks

The main risk is valuation. If growth stays near the five-year rate of 9.7% in revenue, the price of 221.31 USD would require a much higher growth path, as the reverse DCF shows at 28.5%. A slowdown in the semiconductor capital spending cycle would pressure the high margins and the 83.7% ROIC. Estimate revisions have been positive, but the next-year growth assumption of 26.8% leaves little room for disappointment. The beta of 2.01 indicates that the share price is volatile. Some figures are not available: the Beneish M-score and any debt maturity schedule. This analysis also has no revenue breakdown by segment, so it cannot show which products or regions drive the growth.