KLA-Tencor: A Fundamentally Strong Stock



Profit margins

Gross margin for KLA-Tencor (KLAC) in 1Q16 was ~58.0%, compared to ~55.1% in 1Q15, and ~57.3% in 4Q15. The firm’s operating margin in 1Q16 was 25% compared to ~26.7% in 4Q15, and ~18.0% in 1Q15. Net margin for 1Q16 also rose from ~11.2% in 1Q15 to ~16.3% in 1Q16. In comparison, the gross margins for LAM Research (LRCX) and Applied Materials (AMAT) were ~43.3% and ~40.9%, respectively, for 2Q15.

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Low cash-to-debt ratio

The cash-to-debt ratio measures the financial strength of a company. KLA-Tencor’s cash-to-debt ratio in 1Q16 was 0.75x, lower than the industry median of 1.75x. KLA-Tencor’s interest coverage ratio, determining how easily the company can pay interest expenses on outstanding debt, is low, at 6.24x.

Current and quick ratio

The firm’s current ratio was 3.90x, higher than the industry median of 2.20x. KLA-Tencor’s quick ratio is 3.0x, compared to the industry median of 1.7x. Current and quick ratios measure a company’s ability to pay short-term obligations.

Over the past five years, the revenue growth per share for the firm has been 6.3%. During the same period, its EBITDA [1. earnings before interest, tax, depreciation, and amortization] growth and book value growth stood at 2.1% and 4.4%, respectively.

Share price and beta

The stock is currently trading at ~$64.0, or 42.3% higher than its 52-week low, and ~24.0% lower than its 52-week high. KLA-Tencor has an average trading volume of ~$2.0 million shares with a beta of 1.33.

In the past 12 months, KLA-Tencor’s revenue growth per share and EBITDA fell by -1.2% and -24%, respectively.

KLA-Tencor constitutes ~2.4% of the iShares PHLX Semiconductor ETF (SOXX) and 0.84% of the VanEck Vectors Semiconductor ETF (SMH).


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