Stock Analysis on Net

Lam Research Corp. (NASDAQ:LRCX)

Dividend Discount Model (DDM) 

Microsoft Excel

Intrinsic Stock Value (Valuation Summary)

Lam Research Corp., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 17.59%
0 DPS01 6.90
1 DPS1 9.73 = 6.90 × (1 + 41.01%) 8.27
2 DPS2 13.13 = 9.73 × (1 + 34.94%) 9.49
3 DPS3 16.92 = 13.13 × (1 + 28.86%) 10.40
4 DPS4 20.77 = 16.92 × (1 + 22.78%) 10.86
5 DPS5 24.24 = 20.77 × (1 + 16.71%) 10.78
5 Terminal value (TV5) 3,197.47 = 24.24 × (1 + 16.71%) ÷ (17.59%16.71%) 1,422.14
Intrinsic value of Lam Research Corp. common stock (per share) $1,471.96
Current share price $910.09

Based on: 10-K (reporting date: 2023-06-25).

1 DPS0 = Sum of the last year dividends per share of Lam Research 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 4.53%
Expected rate of return on market portfolio2 E(RM) 13.63%
Systematic risk of Lam Research Corp. common stock βLRCX 1.43
 
Required rate of return on Lam Research Corp. common stock3 rLRCX 17.59%

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 rLRCX = RF + βLRCX [E(RM) – RF]
= 4.53% + 1.43 [13.63%4.53%]
= 17.59%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Lam Research Corp., PRAT model

Microsoft Excel
Average Jun 25, 2023 Jun 26, 2022 Jun 27, 2021 Jun 28, 2020 Jun 30, 2019 Jun 24, 2018
Selected Financial Data (US$ in thousands)
Cash dividends declared 933,559 835,474 745,294 665,099 662,844 409,243
Net income 4,510,931 4,605,286 3,908,458 2,251,753 2,191,430 2,380,681
Revenue 17,428,516 17,227,039 14,626,150 10,044,736 9,653,559 11,076,998
Total assets 18,781,643 17,195,632 15,892,152 14,559,047 12,001,333 12,479,478
Stockholders’ equity 8,210,172 6,278,366 6,027,188 5,172,494 4,673,865 6,501,851
Financial Ratios
Retention rate1 0.79 0.82 0.81 0.70 0.70 0.83
Profit margin2 25.88% 26.73% 26.72% 22.42% 22.70% 21.49%
Asset turnover3 0.93 1.00 0.92 0.69 0.80 0.89
Financial leverage4 2.29 2.74 2.64 2.81 2.57 1.92
Averages
Retention rate 0.78
Profit margin 24.32%
Asset turnover 0.87
Financial leverage 2.49
 
Dividend growth rate (g)5 41.01%

Based on: 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-24).

2023 Calculations

1 Retention rate = (Net income – Cash dividends declared) ÷ Net income
= (4,510,931933,559) ÷ 4,510,931
= 0.79

2 Profit margin = 100 × Net income ÷ Revenue
= 100 × 4,510,931 ÷ 17,428,516
= 25.88%

3 Asset turnover = Revenue ÷ Total assets
= 17,428,516 ÷ 18,781,643
= 0.93

4 Financial leverage = Total assets ÷ Stockholders’ equity
= 18,781,643 ÷ 8,210,172
= 2.29

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.78 × 24.32% × 0.87 × 2.49
= 41.01%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($910.09 × 17.59%$6.90) ÷ ($910.09 + $6.90)
= 16.71%

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


Dividend growth rate (g) forecast

Lam Research Corp., H-model

Microsoft Excel
Year Value gt
1 g1 41.01%
2 g2 34.94%
3 g3 28.86%
4 g4 22.78%
5 and thereafter g5 16.71%

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)
= 41.01% + (16.71%41.01%) × (2 – 1) ÷ (5 – 1)
= 34.94%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 41.01% + (16.71%41.01%) × (3 – 1) ÷ (5 – 1)
= 28.86%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 41.01% + (16.71%41.01%) × (4 – 1) ÷ (5 – 1)
= 22.78%