Intrinsic value of Lam Research - LRCX

Previous Close

$145.20

  Intrinsic Value

$1,082

stock screener

  Rating & Target

str. buy

+645%

Previous close

$145.20

 
Intrinsic value

$1,082

 
Up/down potential

+645%

 
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 0001), $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 23.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  34.30
  31.37
  28.73
  26.36
  24.22
  22.30
  20.57
  19.01
  17.61
  16.35
  15.22
  14.19
  13.28
  12.45
  11.70
  11.03
  10.43
  9.89
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
Revenue, $m
  10,762
  14,138
  18,201
  22,998
  28,570
  34,941
  42,129
  50,139
  58,970
  68,612
  79,053
  90,274
  102,258
  114,987
  128,444
  142,614
  157,488
  173,058
  189,322
  206,281
  223,943
  242,320
  261,428
  281,288
  301,926
  323,374
  345,664
  368,837
  392,934
  418,004
Variable operating expenses, $m
  6,514
  8,501
  10,892
  13,716
  16,995
  20,745
  24,976
  29,691
  34,888
  40,564
  46,529
  53,133
  60,187
  67,679
  75,599
  83,940
  92,694
  101,858
  111,431
  121,413
  131,808
  142,625
  153,871
  165,560
  177,708
  190,331
  203,451
  217,090
  231,273
  246,029
Fixed operating expenses, $m
  1,271
  1,299
  1,328
  1,357
  1,387
  1,418
  1,449
  1,481
  1,513
  1,546
  1,580
  1,615
  1,651
  1,687
  1,724
  1,762
  1,801
  1,841
  1,881
  1,922
  1,965
  2,008
  2,052
  2,097
  2,143
  2,191
  2,239
  2,288
  2,338
  2,390
Total operating expenses, $m
  7,785
  9,800
  12,220
  15,073
  18,382
  22,163
  26,425
  31,172
  36,401
  42,110
  48,109
  54,748
  61,838
  69,366
  77,323
  85,702
  94,495
  103,699
  113,312
  123,335
  133,773
  144,633
  155,923
  167,657
  179,851
  192,522
  205,690
  219,378
  233,611
  248,419
Operating income, $m
  2,977
  4,338
  5,981
  7,925
  10,187
  12,778
  15,704
  18,968
  22,569
  26,502
  30,943
  35,525
  40,420
  45,621
  51,120
  56,912
  62,993
  69,359
  76,010
  82,946
  90,170
  97,687
  105,505
  113,630
  122,075
  130,852
  139,975
  149,459
  159,323
  169,585
EBITDA, $m
  3,416
  4,858
  6,599
  8,659
  11,056
  13,800
  16,899
  20,356
  24,169
  28,335
  32,848
  37,701
  42,884
  48,392
  54,215
  60,349
  66,788
  73,529
  80,572
  87,916
  95,566
  103,526
  111,804
  120,408
  129,351
  138,644
  148,304
  158,347
  168,791
  179,658
Interest expense (income), $m
  105
  145
  227
  327
  447
  589
  754
  943
  1,156
  1,393
  1,655
  1,941
  2,250
  2,582
  2,937
  3,314
  3,713
  4,133
  4,573
  5,035
  5,516
  6,019
  6,542
  7,086
  7,652
  8,241
  8,852
  9,487
  10,148
  10,834
  11,548
Earnings before tax, $m
  2,831
  4,111
  5,654
  7,478
  9,598
  12,024
  14,761
  17,812
  21,175
  24,848
  29,003
  33,276
  37,838
  42,684
  47,806
  53,199
  58,860
  64,786
  70,975
  77,429
  84,151
  91,145
  98,418
  105,978
  113,835
  122,000
  130,487
  139,311
  148,489
  158,038
Tax expense, $m
  764
  1,110
  1,527
  2,019
  2,591
  3,246
  3,986
  4,809
  5,717
  6,709
  7,831
  8,984
  10,216
  11,525
  12,908
  14,364
  15,892
  17,492
  19,163
  20,906
  22,721
  24,609
  26,573
  28,614
  30,735
  32,940
  35,232
  37,614
  40,092
  42,670
Net income, $m
  2,067
  3,001
  4,127
  5,459
  7,007
  8,777
  10,776
  13,003
  15,458
  18,139
  21,172
  24,291
  27,622
  31,159
  34,898
  38,836
  42,968
  47,294
  51,812
  56,524
  61,430
  66,536
  71,845
  77,364
  83,099
  89,060
  95,256
  101,697
  108,397
  115,367

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
  10,562
  13,875
  17,861
  22,570
  28,037
  34,289
  41,343
  49,204
  57,871
  67,333
  77,579
  88,591
  100,351
  112,843
  126,049
  139,955
  154,552
  169,831
  185,792
  202,435
  219,768
  237,802
  256,553
  276,043
  296,297
  317,344
  339,219
  361,959
  385,608
  410,210
Adjusted assets (=assets-cash), $m
  10,562
  13,875
  17,861
  22,570
  28,037
  34,289
  41,343
  49,204
  57,871
  67,333
  77,579
  88,591
  100,351
  112,843
  126,049
  139,955
  154,552
  169,831
  185,792
  202,435
  219,768
  237,802
  256,553
  276,043
  296,297
  317,344
  339,219
  361,959
  385,608
  410,210
Revenue / Adjusted assets
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
  1.019
Average production assets, $m
  2,152
  2,828
  3,640
  4,600
  5,714
  6,988
  8,426
  10,028
  11,794
  13,722
  15,811
  18,055
  20,452
  22,997
  25,689
  28,523
  31,498
  34,612
  37,864
  41,256
  44,789
  48,464
  52,286
  56,258
  60,385
  64,675
  69,133
  73,767
  78,587
  83,601
Working capital, $m
  1,076
  1,414
  1,820
  2,300
  2,857
  3,494
  4,213
  5,014
  5,897
  6,861
  7,905
  9,027
  10,226
  11,499
  12,844
  14,261
  15,749
  17,306
  18,932
  20,628
  22,394
  24,232
  26,143
  28,129
  30,193
  32,337
  34,566
  36,884
  39,293
  41,800
Total debt, $m
  4,200
  6,053
  8,281
  10,913
  13,969
  17,464
  21,407
  25,802
  30,646
  35,936
  41,663
  47,819
  54,393
  61,376
  68,758
  76,531
  84,691
  93,232
  102,154
  111,458
  121,147
  131,228
  141,710
  152,605
  163,926
  175,692
  187,920
  200,632
  213,851
  227,604
Total liabilities, $m
  5,904
  7,756
  9,985
  12,616
  15,673
  19,168
  23,111
  27,505
  32,350
  37,639
  43,367
  49,522
  56,096
  63,079
  70,461
  78,235
  86,394
  94,936
  103,857
  113,161
  122,850
  132,931
  143,413
  154,308
  165,630
  177,395
  189,623
  202,335
  215,555
  229,307
Total equity, $m
  4,658
  6,119
  7,877
  9,953
  12,364
  15,122
  18,232
  21,699
  25,521
  29,694
  34,212
  39,069
  44,255
  49,764
  55,587
  61,720
  68,157
  74,896
  81,934
  89,274
  96,917
  104,871
  113,140
  121,735
  130,667
  139,949
  149,596
  159,624
  170,053
  180,903
Total liabilities and equity, $m
  10,562
  13,875
  17,862
  22,569
  28,037
  34,290
  41,343
  49,204
  57,871
  67,333
  77,579
  88,591
  100,351
  112,843
  126,048
  139,955
  154,551
  169,832
  185,791
  202,435
  219,767
  237,802
  256,553
  276,043
  296,297
  317,344
  339,219
  361,959
  385,608
  410,210
Debt-to-equity ratio
  0.900
  0.990
  1.050
  1.100
  1.130
  1.150
  1.170
  1.190
  1.200
  1.210
  1.220
  1.220
  1.230
  1.230
  1.240
  1.240
  1.240
  1.240
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.250
  1.260
  1.260
  1.260
  1.260
  1.260
Adjusted equity ratio
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441
  0.441

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,067
  3,001
  4,127
  5,459
  7,007
  8,777
  10,776
  13,003
  15,458
  18,139
  21,172
  24,291
  27,622
  31,159
  34,898
  38,836
  42,968
  47,294
  51,812
  56,524
  61,430
  66,536
  71,845
  77,364
  83,099
  89,060
  95,256
  101,697
  108,397
  115,367
Depreciation, amort., depletion, $m
  439
  520
  618
  734
  868
  1,022
  1,195
  1,388
  1,601
  1,833
  1,905
  2,175
  2,464
  2,771
  3,095
  3,436
  3,795
  4,170
  4,562
  4,971
  5,396
  5,839
  6,299
  6,778
  7,275
  7,792
  8,329
  8,888
  9,468
  10,072
Funds from operations, $m
  2,506
  3,521
  4,745
  6,193
  7,875
  9,799
  11,970
  14,391
  17,059
  19,972
  23,077
  26,466
  30,086
  33,930
  37,993
  42,272
  46,763
  51,464
  56,374
  61,494
  66,827
  72,375
  78,145
  84,142
  90,375
  96,852
  103,585
  110,585
  117,865
  125,440
Change in working capital, $m
  275
  338
  406
  480
  557
  637
  719
  801
  883
  964
  1,044
  1,122
  1,198
  1,273
  1,346
  1,417
  1,487
  1,557
  1,626
  1,696
  1,766
  1,838
  1,911
  1,986
  2,064
  2,145
  2,229
  2,317
  2,410
  2,507
Cash from operations, $m
  2,231
  3,184
  4,339
  5,713
  7,318
  9,162
  11,252
  13,590
  16,176
  19,007
  22,033
  25,344
  28,887
  32,657
  36,648
  40,855
  45,275
  49,907
  54,747
  59,798
  65,060
  70,538
  76,234
  82,156
  88,311
  94,707
  101,356
  108,268
  115,455
  122,933
Maintenance CAPEX, $m
  -193
  -259
  -341
  -439
  -554
  -688
  -842
  -1,015
  -1,208
  -1,421
  -1,653
  -1,905
  -2,175
  -2,464
  -2,771
  -3,095
  -3,436
  -3,795
  -4,170
  -4,562
  -4,971
  -5,396
  -5,839
  -6,299
  -6,778
  -7,275
  -7,792
  -8,329
  -8,888
  -9,468
New CAPEX, $m
  -553
  -675
  -812
  -960
  -1,114
  -1,274
  -1,438
  -1,602
  -1,766
  -1,928
  -2,088
  -2,244
  -2,397
  -2,546
  -2,691
  -2,834
  -2,975
  -3,114
  -3,253
  -3,392
  -3,532
  -3,675
  -3,822
  -3,972
  -4,128
  -4,289
  -4,458
  -4,635
  -4,820
  -5,014
Cash from investing activities, $m
  -746
  -934
  -1,153
  -1,399
  -1,668
  -1,962
  -2,280
  -2,617
  -2,974
  -3,349
  -3,741
  -4,149
  -4,572
  -5,010
  -5,462
  -5,929
  -6,411
  -6,909
  -7,423
  -7,954
  -8,503
  -9,071
  -9,661
  -10,271
  -10,906
  -11,564
  -12,250
  -12,964
  -13,708
  -14,482
Free cash flow, $m
  1,485
  2,249
  3,186
  4,315
  5,649
  7,199
  8,972
  10,972
  13,201
  15,658
  18,292
  21,195
  24,315
  27,647
  31,185
  34,926
  38,864
  42,998
  47,325
  51,844
  56,557
  61,466
  66,573
  71,884
  77,405
  83,143
  89,106
  95,304
  101,748
  108,451
Issuance/(repayment) of debt, $m
  1,507
  1,852
  2,229
  2,632
  3,056
  3,495
  3,943
  4,394
  4,844
  5,290
  5,727
  6,156
  6,574
  6,983
  7,382
  7,774
  8,159
  8,541
  8,922
  9,304
  9,689
  10,081
  10,482
  10,895
  11,322
  11,765
  12,228
  12,712
  13,219
  13,753
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  
  1,507
  1,852
  2,229
  2,632
  3,056
  3,495
  3,943
  4,394
  4,844
  5,290
  5,727
  6,156
  6,574
  6,983
  7,382
  7,774
  8,159
  8,541
  8,922
  9,304
  9,689
  10,081
  10,482
  10,895
  11,322
  11,765
  12,228
  12,712
  13,219
  13,753
Total cash flow (excl. dividends), $m
  2,993
  4,101
  5,415
  6,947
  8,705
  10,694
  12,915
  15,367
  18,046
  20,948
  24,019
  27,351
  30,890
  34,630
  38,568
  42,700
  47,024
  51,539
  56,247
  61,148
  66,246
  71,547
  77,056
  82,779
  88,727
  94,908
  101,334
  108,016
  114,968
  122,203
Retained Cash Flow (-), $m
  -1,187
  -1,461
  -1,758
  -2,076
  -2,411
  -2,757
  -3,111
  -3,467
  -3,822
  -4,173
  -4,518
  -4,856
  -5,186
  -5,509
  -5,824
  -6,133
  -6,437
  -6,738
  -7,039
  -7,340
  -7,644
  -7,953
  -8,269
  -8,595
  -8,932
  -9,282
  -9,647
  -10,029
  -10,429
  -10,849
Prev. year cash balance distribution, $m
  3,347
  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
  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 available for distribution, $m
  5,152
  2,640
  3,657
  4,871
  6,294
  7,937
  9,805
  11,900
  14,224
  16,775
  19,501
  22,495
  25,703
  29,121
  32,744
  36,567
  40,587
  44,801
  49,208
  53,808
  58,603
  63,594
  68,786
  74,184
  79,795
  85,626
  91,687
  97,987
  104,539
  111,354
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
  4,940
  2,417
  3,182
  4,010
  4,879
  5,760
  6,624
  7,438
  8,171
  8,794
  9,261
  9,599
  9,773
  9,776
  9,613
  9,292
  8,831
  8,251
  7,577
  6,837
  6,061
  5,277
  4,508
  3,778
  3,104
  2,498
  1,968
  1,516
  1,141
  838
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 13.8
Price to Sales 2.9
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 11.6
Price to Free Cash Flow 12.5
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 $8013.62 million for the last fiscal year's total revenue generated by Lam Research. The default revenue input number comes from 0001 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 34.3% 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 $1244 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 0%.

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 20%.

Life of production assets of 8.3 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 10%. 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 - $6817.451 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 164.045 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 $23.8 billion.

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