Intrinsic value of Lam Research - LRCX

Previous Close

$176.69

  Intrinsic Value

$1,087

stock screener

  Rating & Target

str. buy

+515%

Previous close

$176.69

 
Intrinsic value

$1,087

 
Up/down potential

+515%

 
Rating

str. buy

We calculate the intrinsic value of LRCX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 28.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  36.20
  33.08
  30.27
  27.74
  25.47
  23.42
  21.58
  19.92
  18.43
  17.09
  15.88
  14.79
  13.81
  12.93
  12.14
  11.42
  10.78
  10.20
  9.68
  9.21
  8.79
  8.41
  8.07
  7.77
  7.49
  7.24
  7.02
  6.81
  6.63
  6.47
Revenue, $m
  10,915
  14,526
  18,923
  24,173
  30,330
  37,434
  45,513
  54,581
  64,640
  75,686
  87,704
  100,676
  114,581
  129,397
  145,103
  161,679
  179,110
  197,385
  216,498
  236,447
  257,239
  278,882
  301,395
  324,799
  349,123
  374,398
  400,666
  427,968
  456,355
  485,879
Variable operating expenses, $m
  6,604
  8,729
  11,317
  14,407
  18,031
  22,213
  26,968
  32,305
  38,225
  44,727
  51,620
  59,255
  67,440
  76,160
  85,404
  95,160
  105,420
  116,176
  127,426
  139,167
  151,405
  164,144
  177,394
  191,169
  205,485
  220,362
  235,823
  251,892
  268,600
  285,977
Fixed operating expenses, $m
  1,270
  1,298
  1,327
  1,356
  1,386
  1,416
  1,448
  1,479
  1,512
  1,545
  1,579
  1,614
  1,649
  1,686
  1,723
  1,761
  1,799
  1,839
  1,879
  1,921
  1,963
  2,006
  2,050
  2,096
  2,142
  2,189
  2,237
  2,286
  2,336
  2,388
Total operating expenses, $m
  7,874
  10,027
  12,644
  15,763
  19,417
  23,629
  28,416
  33,784
  39,737
  46,272
  53,199
  60,869
  69,089
  77,846
  87,127
  96,921
  107,219
  118,015
  129,305
  141,088
  153,368
  166,150
  179,444
  193,265
  207,627
  222,551
  238,060
  254,178
  270,936
  288,365
Operating income, $m
  3,041
  4,498
  6,279
  8,410
  10,913
  13,805
  17,098
  20,797
  24,903
  29,414
  34,504
  39,806
  45,492
  51,551
  57,976
  64,758
  71,891
  79,370
  87,193
  95,359
  103,871
  112,732
  121,951
  131,534
  141,495
  151,847
  162,606
  173,790
  185,418
  197,514
EBITDA, $m
  3,566
  5,138
  7,058
  9,356
  12,054
  15,172
  18,720
  22,707
  27,132
  31,993
  37,284
  42,998
  49,124
  55,653
  62,576
  69,883
  77,568
  85,627
  94,056
  102,855
  112,025
  121,573
  131,505
  141,831
  152,563
  163,716
  175,307
  187,357
  199,885
  212,916
Interest expense (income), $m
  105
  96
  182
  289
  420
  575
  758
  968
  1,208
  1,476
  1,774
  2,102
  2,458
  2,842
  3,254
  3,693
  4,159
  4,650
  5,166
  5,708
  6,274
  6,865
  7,481
  8,123
  8,790
  9,483
  10,204
  10,953
  11,731
  12,540
  13,382
Earnings before tax, $m
  2,944
  4,316
  5,989
  7,990
  10,338
  13,048
  16,130
  19,589
  23,427
  27,640
  32,402
  37,349
  42,650
  48,297
  54,283
  60,599
  67,241
  74,204
  81,485
  89,085
  97,006
  105,251
  113,828
  122,745
  132,012
  141,643
  151,653
  162,058
  172,878
  184,132
Tax expense, $m
  795
  1,165
  1,617
  2,157
  2,791
  3,523
  4,355
  5,289
  6,325
  7,463
  8,749
  10,084
  11,515
  13,040
  14,656
  16,362
  18,155
  20,035
  22,001
  24,053
  26,191
  28,418
  30,734
  33,141
  35,643
  38,244
  40,946
  43,756
  46,677
  49,716
Net income, $m
  2,149
  3,151
  4,372
  5,833
  7,547
  9,525
  11,775
  14,300
  17,101
  20,177
  23,654
  27,265
  31,134
  35,257
  39,626
  44,237
  49,086
  54,169
  59,484
  65,032
  70,814
  76,833
  83,094
  89,604
  96,369
  103,400
  110,707
  118,303
  126,201
  134,417

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  11,955
  15,910
  20,726
  26,477
  33,220
  41,002
  49,850
  59,782
  70,800
  82,898
  96,061
  110,269
  125,499
  141,727
  158,929
  177,085
  196,178
  216,194
  237,128
  258,979
  281,751
  305,457
  330,115
  355,749
  382,390
  410,075
  438,845
  468,749
  499,841
  532,178
Adjusted assets (=assets-cash), $m
  11,955
  15,910
  20,726
  26,477
  33,220
  41,002
  49,850
  59,782
  70,800
  82,898
  96,061
  110,269
  125,499
  141,727
  158,929
  177,085
  196,178
  216,194
  237,128
  258,979
  281,751
  305,457
  330,115
  355,749
  382,390
  410,075
  438,845
  468,749
  499,841
  532,178
Revenue / Adjusted assets
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
  0.913
Average production assets, $m
  3,460
  4,605
  5,999
  7,663
  9,615
  11,867
  14,428
  17,302
  20,491
  23,992
  27,802
  31,914
  36,322
  41,019
  45,998
  51,252
  56,778
  62,571
  68,630
  74,954
  81,545
  88,406
  95,542
  102,961
  110,672
  118,684
  127,011
  135,666
  144,664
  154,024
Working capital, $m
  1,048
  1,394
  1,817
  2,321
  2,912
  3,594
  4,369
  5,240
  6,205
  7,266
  8,420
  9,665
  11,000
  12,422
  13,930
  15,521
  17,195
  18,949
  20,784
  22,699
  24,695
  26,773
  28,934
  31,181
  33,516
  35,942
  38,464
  41,085
  43,810
  46,644
Total debt, $m
  3,377
  5,359
  7,771
  10,652
  14,031
  17,929
  22,363
  27,338
  32,858
  38,919
  45,514
  52,633
  60,263
  68,393
  77,011
  86,107
  95,673
  105,701
  116,189
  127,136
  138,545
  150,422
  162,775
  175,618
  188,965
  202,835
  217,249
  232,231
  247,808
  264,009
Total liabilities, $m
  5,990
  7,971
  10,384
  13,265
  16,643
  20,542
  24,975
  29,951
  35,471
  41,532
  48,127
  55,245
  62,875
  71,005
  79,624
  88,720
  98,285
  108,313
  118,801
  129,748
  141,157
  153,034
  165,388
  178,230
  191,578
  205,448
  219,861
  234,843
  250,420
  266,621
Total equity, $m
  5,966
  7,939
  10,342
  13,212
  16,577
  20,460
  24,875
  29,831
  35,329
  41,366
  47,934
  55,024
  62,624
  70,722
  79,306
  88,366
  97,893
  107,881
  118,327
  129,230
  140,594
  152,423
  164,727
  177,519
  190,813
  204,627
  218,984
  233,906
  249,421
  265,557
Total liabilities and equity, $m
  11,956
  15,910
  20,726
  26,477
  33,220
  41,002
  49,850
  59,782
  70,800
  82,898
  96,061
  110,269
  125,499
  141,727
  158,930
  177,086
  196,178
  216,194
  237,128
  258,978
  281,751
  305,457
  330,115
  355,749
  382,391
  410,075
  438,845
  468,749
  499,841
  532,178
Debt-to-equity ratio
  0.570
  0.670
  0.750
  0.810
  0.850
  0.880
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.960
  0.970
  0.970
  0.970
  0.980
  0.980
  0.980
  0.980
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
  0.990
Adjusted equity ratio
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,149
  3,151
  4,372
  5,833
  7,547
  9,525
  11,775
  14,300
  17,101
  20,177
  23,654
  27,265
  31,134
  35,257
  39,626
  44,237
  49,086
  54,169
  59,484
  65,032
  70,814
  76,833
  83,094
  89,604
  96,369
  103,400
  110,707
  118,303
  126,201
  134,417
Depreciation, amort., depletion, $m
  526
  640
  780
  946
  1,141
  1,366
  1,622
  1,910
  2,229
  2,579
  2,780
  3,191
  3,632
  4,102
  4,600
  5,125
  5,678
  6,257
  6,863
  7,495
  8,154
  8,841
  9,554
  10,296
  11,067
  11,868
  12,701
  13,567
  14,466
  15,402
Funds from operations, $m
  2,675
  3,791
  5,152
  6,779
  8,688
  10,891
  13,397
  16,210
  19,330
  22,756
  26,434
  30,456
  34,766
  39,359
  44,226
  49,363
  54,764
  60,426
  66,347
  72,527
  78,969
  85,674
  92,649
  99,900
  107,436
  115,268
  123,408
  131,869
  140,667
  149,819
Change in working capital, $m
  279
  347
  422
  504
  591
  682
  776
  870
  966
  1,060
  1,154
  1,245
  1,335
  1,422
  1,508
  1,591
  1,673
  1,754
  1,835
  1,915
  1,996
  2,078
  2,161
  2,247
  2,335
  2,426
  2,522
  2,621
  2,725
  2,834
Cash from operations, $m
  2,397
  3,444
  4,730
  6,275
  8,097
  10,209
  12,622
  15,339
  18,365
  21,695
  25,280
  29,211
  33,432
  37,936
  42,718
  47,771
  53,090
  58,671
  64,512
  70,612
  76,973
  83,596
  90,487
  97,653
  105,101
  112,842
  120,886
  129,248
  137,942
  146,985
Maintenance CAPEX, $m
  -254
  -346
  -460
  -600
  -766
  -961
  -1,187
  -1,443
  -1,730
  -2,049
  -2,399
  -2,780
  -3,191
  -3,632
  -4,102
  -4,600
  -5,125
  -5,678
  -6,257
  -6,863
  -7,495
  -8,154
  -8,841
  -9,554
  -10,296
  -11,067
  -11,868
  -12,701
  -13,567
  -14,466
New CAPEX, $m
  -924
  -1,145
  -1,394
  -1,664
  -1,952
  -2,252
  -2,561
  -2,874
  -3,189
  -3,501
  -3,810
  -4,112
  -4,408
  -4,697
  -4,979
  -5,255
  -5,526
  -5,793
  -6,059
  -6,324
  -6,591
  -6,861
  -7,137
  -7,419
  -7,710
  -8,012
  -8,327
  -8,655
  -8,999
  -9,359
Cash from investing activities, $m
  -1,178
  -1,491
  -1,854
  -2,264
  -2,718
  -3,213
  -3,748
  -4,317
  -4,919
  -5,550
  -6,209
  -6,892
  -7,599
  -8,329
  -9,081
  -9,855
  -10,651
  -11,471
  -12,316
  -13,187
  -14,086
  -15,015
  -15,978
  -16,973
  -18,006
  -19,079
  -20,195
  -21,356
  -22,566
  -23,825
Free cash flow, $m
  1,219
  1,954
  2,875
  4,011
  5,379
  6,996
  8,874
  11,022
  13,445
  16,145
  19,071
  22,318
  25,832
  29,607
  33,638
  37,917
  42,439
  47,200
  52,196
  57,425
  62,886
  68,580
  74,510
  80,680
  87,094
  93,762
  100,691
  107,892
  115,377
  123,159
Issuance/(repayment) of debt, $m
  1,592
  1,981
  2,413
  2,881
  3,379
  3,898
  4,433
  4,976
  5,520
  6,061
  6,595
  7,118
  7,630
  8,130
  8,618
  9,096
  9,565
  10,028
  10,488
  10,947
  11,409
  11,877
  12,354
  12,843
  13,347
  13,870
  14,414
  14,982
  15,577
  16,201
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,592
  1,981
  2,413
  2,881
  3,379
  3,898
  4,433
  4,976
  5,520
  6,061
  6,595
  7,118
  7,630
  8,130
  8,618
  9,096
  9,565
  10,028
  10,488
  10,947
  11,409
  11,877
  12,354
  12,843
  13,347
  13,870
  14,414
  14,982
  15,577
  16,201
Total cash flow (excl. dividends), $m
  2,811
  3,935
  5,288
  6,891
  8,757
  10,894
  13,307
  15,998
  18,966
  22,206
  25,666
  29,437
  33,463
  37,738
  42,256
  47,013
  52,004
  57,229
  62,684
  68,372
  74,295
  80,457
  86,864
  93,522
  100,442
  107,632
  115,105
  122,874
  130,954
  139,360
Retained Cash Flow (-), $m
  -1,587
  -1,973
  -2,403
  -2,869
  -3,365
  -3,883
  -4,415
  -4,956
  -5,498
  -6,037
  -6,568
  -7,090
  -7,600
  -8,098
  -8,584
  -9,060
  -9,527
  -9,988
  -10,446
  -10,903
  -11,363
  -11,829
  -12,304
  -12,791
  -13,294
  -13,815
  -14,356
  -14,922
  -15,515
  -16,136
Prev. year cash balance distribution, $m
  2,439
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  152
  207
  276
  360
  459
  576
  711
  865
  1,037
  1,228
  1,438
  1,666
  1,913
  2,177
  2,459
  2,757
  3,072
  3,403
  3,750
  4,113
  4,493
  4,888
  5,299
  5,727
  6,171
  6,633
  7,114
  7,613
  8,131
  8,671
Cash available for distribution, $m
  3,663
  1,961
  2,885
  4,022
  5,392
  7,011
  8,892
  11,042
  13,467
  16,169
  19,098
  22,347
  25,863
  29,640
  33,672
  37,953
  42,477
  47,240
  52,238
  57,469
  62,932
  68,628
  74,559
  80,731
  87,148
  93,817
  100,749
  107,952
  115,439
  123,224
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  3,512
  1,796
  2,511
  3,312
  4,180
  5,088
  6,007
  6,902
  7,736
  8,477
  9,069
  9,536
  9,833
  9,951
  9,886
  9,645
  9,242
  8,700
  8,043
  7,303
  6,509
  5,694
  4,887
  4,112
  3,390
  2,737
  2,162
  1,670
  1,260
  928
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Lam Research Corporation is a supplier of wafer fabrication equipment and services to the semiconductor industry. The Company designs, manufactures, markets, refurbishes and services semiconductor processing systems that are used in the fabrication of integrated circuits (ICs). It operates through manufacturing and servicing of wafer processing semiconductor manufacturing equipment segment. Its products are designed to enable its customers build a range of devices that are used in a range of electronic products, including cell phones, tablets, computers, storage devices, and networking equipment. Its customer base includes semiconductor memory, foundry, and integrated device manufacturers (IDMs) that make products, such as dynamic random-access memory (DRAM), negative-AND (NAND) memory and logic devices. It offers a portfolio of products that are used in several areas of the semiconductor manufacturing process flow, including thin film deposition, plasma etch and single-wafer clean.

FINANCIAL RATIOS  of  Lam Research (LRCX)

Valuation Ratios
P/E Ratio 16.8
Price to Sales 3.6
Price to Book 4.2
Price to Tangible Book
Price to Cash Flow 14.1
Price to Free Cash Flow 15.3
Growth Rates
Sales Growth Rate 36.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -10.3%
Cap. Spend. - 3 Yr. Gr. Rate 1.5%
Financial Strength
Quick Ratio 7
Current Ratio 0
LT Debt to Equity 28.7%
Total Debt to Equity 42%
Interest Coverage 18
Management Effectiveness
Return On Assets 14.7%
Ret/ On Assets - 3 Yr. Avg. 10.5%
Return On Total Capital 16.9%
Ret/ On T. Cap. - 3 Yr. Avg. 12.1%
Return On Equity 26.7%
Return On Equity - 3 Yr. Avg. 18.8%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 45%
Gross Margin - 3 Yr. Avg. 44.3%
EBITDA Margin 27.8%
EBITDA Margin - 3 Yr. Avg. 23.3%
Operating Margin 23.3%
Oper. Margin - 3 Yr. Avg. 18.8%
Pre-Tax Margin 22.6%
Pre-Tax Margin - 3 Yr. Avg. 17.7%
Net Profit Margin 21.2%
Net Profit Margin - 3 Yr. Avg. 16.4%
Effective Tax Rate 6.3%
Eff/ Tax Rate - 3 Yr. Avg. 7.5%
Payout Ratio 14.4%

LRCX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LRCX stock intrinsic value calculation we used $8014 million for the last fiscal year's total revenue generated by Lam Research. The default revenue input number comes from 2017 income statement of Lam Research. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LRCX stock valuation model: a) initial revenue growth rate of 36.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for LRCX is calculated based on our internal credit rating of Lam Research, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Lam Research.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LRCX stock the variable cost ratio is equal to 61.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1243 million in the base year in the intrinsic value calculation for LRCX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Lam Research.

Corporate tax rate of 27% is the nominal tax rate for Lam Research. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LRCX stock is equal to 1.9%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LRCX are equal to 31.7%.

Life of production assets of 10 years is the average useful life of capital assets used in Lam Research operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LRCX is equal to 9.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $6817 million for Lam Research - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 162 million for Lam Research is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Lam Research at the current share price and the inputted number of shares is $28.6 billion.

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COMPANY NEWS

▶ Activist investor Starboard buys 5.8% stake in Symantec, nominates board members   [Aug-16-18 10:02AM  American City Business Journals]
▶ Why Lam Research Corp. Stock Gained 10.3% in July   [Aug-10-18 09:49AM  Motley Fool]
▶ Is Tech Overpriced? Not These 5 Stocks   [Aug-01-18 12:41PM  Barrons.com]
▶ Jim Cramer: Lam Research May Not Be Bottoming Yet   [Jul-31-18 07:01PM  TheStreet.com]
▶ Lam, Ultra Clean stocks turn around   [05:45PM  MarketWatch]
▶ Lam Research: Fiscal 4Q Earnings Snapshot   [04:50PM  Associated Press]
▶ 6 Chip Stocks to Play Into Earnings   [Jul-18-18 09:28AM  TheStreet.com]
▶ Better Buy: Lam Research vs. Applied Materials   [Jul-16-18 09:16PM  Motley Fool]
▶ 2 Chip Stocks With at Least 25% Upside   [06:00AM  Investopedia]
▶ Chip Equipment Stocks Get Price-Target Cuts On Market Slowdown   [Jul-09-18 04:16PM  Investor's Business Daily]
▶ The 3 Stocks on the MFM Team's Radar   [09:17AM  Motley Fool]
▶ Semiconductor Equipment Stocks Hit With Price-Target Cuts   [Jul-02-18 02:24PM  Investor's Business Daily]
▶ 7 Tech Stocks With Huge Upside in a Volatile Market   [Jun-28-18 12:53PM  Investopedia]
▶ GE, Lam Research and Lennar climb while Akamai stumbles   [Jun-26-18 04:51PM  Associated Press]
▶ 20 Massively Underpriced Stocks Wall Street Expects to Soar   [Jun-25-18 03:36PM  InvestorPlace]
▶ Two Top Chip-Gear Stocks Hit With Downgrades While One Upgraded   [Jun-13-18 04:39PM  Investor's Business Daily]
▶ BofA Highlights The Most 'Underowned' Semi Stocks   [Jun-12-18 10:38AM  Benzinga]
▶ 5 Top Stock Trades for Tuesday Morning   [Jun-11-18 04:04PM  InvestorPlace]
▶ 3 Chip Stocks Posting Big Rebounds   [Jun-05-18 06:00AM  Investopedia]
▶ 3 Red-Hot Chip Stocks Trading at Bargain Prices   [May-24-18 09:32AM  TheStreet.com]
▶ Lam Research Corporation Declares Quarterly Dividend   [May-17-18 04:05PM  GlobeNewswire]
▶ How Micron and Macy's sparked a rally   [May-16-18 07:13PM  CNBC Videos]
▶ 4 Top-Ranked Semiconductor Stocks to Buy   [11:55AM  InvestorPlace]
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