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Let's talk about the popular KLA Corporation (NASDAQ:KLAC). The company's shares led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on KLA’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for KLA
What's The Opportunity In KLA?
KLA appears to be overvalued by 20% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$778 on the market compared to our intrinsic value of $645.47. This means that the opportunity to buy KLA at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since KLA’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 KLA generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. KLA's earnings over the next few years are expected to increase by 51%, 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? It seems like the market has well and truly priced in KLAC’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe KLAC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on KLAC for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for KLAC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.