DCF Studio

    KLAC · NMS · Technology

    KLA Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 48.85

    Market price

    USD 176.99

    Implied upside

    -72.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 38.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 48.85-72.4%
    Exit multiple
    USD 97.49-44.9%
    Market price
    USD 176.99

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn3bn7bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 14.8bnUSD 16.1bnUSD 17.6bnUSD 19.1bnUSD 20.9bn+9.0%
    EBITUSD 5.8bnUSD 6.4bnUSD 6.9bnUSD 7.6bnUSD 8.2bn+9.0%
    NOPATUSD 5.1bnUSD 5.5bnUSD 6.0bnUSD 6.6bnUSD 7.2bn+9.0%
    Add depreciation & amortisationUSD 525.0mUSD 572.1mUSD 623.3mUSD 679.2mUSD 740.1m+9.0%
    Less capital expenditureUSD -429.4mUSD -467.9mUSD -509.8mUSD -555.5mUSD -605.3m+9.0%
    Less increase in working capitalUSD -335.6mUSD -365.7mUSD -398.5mUSD -434.2mUSD -473.1m+9.0%
    Free cashflow to firmUSD 4.8bnUSD 5.3bnUSD 5.8bnUSD 6.3bnUSD 6.8bn+9.0%
    Discount factor0.94520.84440.75440.67400.6021-
    Present valueUSD 4.6bnUSD 4.5bnUSD 4.3bnUSD 4.2bnUSD 4.1bn-2.7%
    Present Value Of The ForecastUSD 21.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.297Reported 1.444, pulled toward 1.0 (Blume)
    Cost of equity12.13%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 231.2bn97.4% of capital
    Total debtUSD 6.2bn2.6% of capital, book value as a proxy
    Tax rate13.0%Effective, capped at statutory
    WACC11.93%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 48.85

    67% of EV

    Forecast FCFF, final year
    USD 6.8bn
    Capex at depreciation, working capital in reinvestment
    USD 7.2bn
    Less reinvestment at g/ROIC (6.3% of NOPAT)
    USD -449.9m
    Capitalised
    USD 6.7bn
    ROIC (reported)
    39.9%
    Terminal value, undiscounted
    USD 73.0bn
    Terminal value, discounted
    USD 44.0bn
    Enterprise value
    USD 65.7bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 64.5bn

    Exit at 20.0x EBITDA

    Value per shareUSD 97.49

    83% of EV

    Terminal value, undiscounted
    USD 179.6bn
    Terminal value, discounted
    USD 108.2bn
    Enterprise value
    USD 129.9bn
    Less net debt
    USD 1.2bn
    Equity value
    USD 128.6bn

    Spread between methods: 66%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    9.93%57.3859.6162.1465.0368.35
    10.93%51.1752.8454.7056.8059.16
    11.93%46.1647.4448.8550.4152.16
    12.93%42.0343.0344.1245.3146.63
    13.93%38.5739.3640.2241.1542.17

    Outlined: this model. Green text: above today's price of 176.99. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year9.0%46.0%+37.0pp
    Discount rate11.9%5.1%-6.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.