Stock Analysis on Net

KLA Corp. (NASDAQ:KLAC)

Dividend Discount Model (DDM)

Microsoft Excel

Intrinsic Stock Value (Valuation Summary)

KLA Corp., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 16.89%
0 DPS01 5.20
1 DPS1 7.51 = 5.20 × (1 + 44.43%) 6.43
2 DPS2 10.32 = 7.51 × (1 + 37.36%) 7.55
3 DPS3 13.44 = 10.32 × (1 + 30.28%) 8.42
4 DPS4 16.56 = 13.44 × (1 + 23.21%) 8.87
5 DPS5 19.23 = 16.56 × (1 + 16.13%) 8.81
5 Terminal value (TV5) 2,951.71 = 19.23 × (1 + 16.13%) ÷ (16.89%16.13%) 1,352.69
Intrinsic value of KLA Corp. common stock (per share) $1,392.77
Current share price $798.16

Based on: 10-K (reporting date: 2023-06-30).

1 DPS0 = Sum of the last year dividends per share of KLA Corp. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.59%
Expected rate of return on market portfolio2 E(RM) 13.81%
Systematic risk of KLA Corp. common stock βKLAC 1.33
 
Required rate of return on KLA Corp. common stock3 rKLAC 16.89%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rKLAC = RF + βKLAC [E(RM) – RF]
= 4.59% + 1.33 [13.81%4.59%]
= 16.89%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

KLA Corp., PRAT model

Microsoft Excel
Average Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018
Selected Financial Data (US$ in thousands)
Cash dividends and dividend equivalents declared 733,547 639,391 561,376 523,396 470,009 397,863
Net income attributable to KLA 3,387,277 3,321,807 2,078,292 1,216,785 1,175,617 802,265
Revenues 10,496,056 9,211,883 6,918,734 5,806,424 4,568,904 4,036,701
Total assets 14,072,357 12,597,088 10,271,124 9,279,960 9,008,516 5,619,356
Total KLA stockholders’ equity 2,919,753 1,401,351 3,377,554 2,665,424 2,659,108 1,620,511
Financial Ratios
Retention rate1 0.78 0.81 0.73 0.57 0.60 0.50
Profit margin2 32.27% 36.06% 30.04% 20.96% 25.73% 19.87%
Asset turnover3 0.75 0.73 0.67 0.63 0.51 0.72
Financial leverage4 4.82 8.99 3.04 3.48 3.39 3.47
Averages
Retention rate 0.67
Profit margin 27.49%
Asset turnover 0.67
Financial leverage 3.64
 
Dividend growth rate (g)5 44.43%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

2023 Calculations

1 Retention rate = (Net income attributable to KLA – Cash dividends and dividend equivalents declared) ÷ Net income attributable to KLA
= (3,387,277733,547) ÷ 3,387,277
= 0.78

2 Profit margin = 100 × Net income attributable to KLA ÷ Revenues
= 100 × 3,387,277 ÷ 10,496,056
= 32.27%

3 Asset turnover = Revenues ÷ Total assets
= 10,496,056 ÷ 14,072,357
= 0.75

4 Financial leverage = Total assets ÷ Total KLA stockholders’ equity
= 14,072,357 ÷ 2,919,753
= 4.82

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.67 × 27.49% × 0.67 × 3.64
= 44.43%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($798.16 × 16.89%$5.20) ÷ ($798.16 + $5.20)
= 16.13%

where:
P0 = current price of share of KLA Corp. common stock
D0 = the last year dividends per share of KLA Corp. common stock
r = required rate of return on KLA Corp. common stock


Dividend growth rate (g) forecast

KLA Corp., H-model

Microsoft Excel
Year Value gt
1 g1 44.43%
2 g2 37.36%
3 g3 30.28%
4 g4 23.21%
5 and thereafter g5 16.13%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 44.43% + (16.13%44.43%) × (2 – 1) ÷ (5 – 1)
= 37.36%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 44.43% + (16.13%44.43%) × (3 – 1) ÷ (5 – 1)
= 30.28%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 44.43% + (16.13%44.43%) × (4 – 1) ÷ (5 – 1)
= 23.21%