Financial statement analysis and common stock valuation

Common-Size Balance Sheet: Assets

Assets components shown as percentage of total assets.

Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the KLA Corp. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to The Firm (FCFF)
• Interest Paid, Net of Tax
• EV to FCFF Ratio, Current
• EV to FCFF Ratio, Historical

Income Statement
Quarterly Data

The income statement (statement of earnings) reports on the performance of KLA Corp., the result of its operating activities.

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

• Rates of Return
• Variance and Covariance
• Systematic Risk (β) Estimation
• Expected Rate of Return

Analysis of Geographic Areas

KLA Corp. operates in 3 regions: Asia; North America; and Europe and Israel.

• Area Asset Turnover
• Revenues
• Land, property and equipment, net

Common Stock Valuation Ratios

Relative valuation technique determine the value of KLA Corp. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Current Valuation Ratios
• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.

Common-Size Income Statement
Quarterly Data

Income statement components (revenues and expenses) shown as percentage of total sales.

Enterprise Value to EBITDA (EV/EBITDA)

To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.

• Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
• EV to EBITDA Ratio, Current
• EV to EBITDA Ratio, Historical

Analysis of Short-term (Operating) Activity Ratios
Quarterly Data

Evaluates revenues and output generated by the KLA Corp. assets. Operating performance ratios describe the relationship between the KLA Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle

Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of KLA Corp. during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Aggregate Accruals

Financial reporting quality relates to the accuracy with which KLA Corp. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of KLA Corp. earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio