Lam Research Corp. (NASDAQ:LRCX)

Market (fair) value of Lam Research

The market value exhibited a strong upward trend from June 30, 2019, to June 27, 2021, rising from approximately $35.8 billion to $87.96 billion. However, in the following year ending June 26, 2022, the market value experienced a notable decline to about $68.22 billion. It subsequently recovered and increased to roughly $91.59 billion by June 25, 2023, and further rose to $108.17 billion by June 30, 2024. This pattern suggests an overall growth trajectory with some volatility during the 2022 period.

Invested capital

The invested capital showed consistent growth from $9.8 billion in June 2019 to a peak of approximately $14.99 billion in June 2023. In the most recent period ending June 30, 2024, invested capital slightly decreased to around $14.84 billion. This indicates steady investment in capital assets over the years, with a marginal reduction in the latest period.

Market value added (MVA)

Market value added, representing the difference between market value and invested capital, grew significantly from about $25.97 billion in June 2019 to a peak of approximately $75.69 billion in June 2021. Following a decline to roughly $54.7 billion in June 2022, MVA rebounded to $76.61 billion in June 2023 and continued to increase to $93.32 billion by June 2024. This performance indicates strong value creation over the period, despite some fluctuations, with a notable increase in value creation capacity after 2022.

Market Value Added (MVA)

The Market Value Added demonstrates a generally increasing trend over the analyzed six-year period. Starting at approximately 25.97 billion US dollars in mid-2019, it nearly doubled by mid-2020 to roughly 49.95 billion. This growth continued, reaching a peak of about 75.69 billion in mid-2021. There was a notable decrease in mid-2022, where MVA dropped to around 54.70 billion, followed by a recovery and further increases in the subsequent years, ultimately reaching a high of about 93.32 billion in mid-2024. This pattern indicates some volatility but overall strong upward momentum in shareholder value.

Invested Capital

Invested capital shows a steady increase from approximately 9.80 billion US dollars in mid-2019 to a peak of nearly 15.00 billion in mid-2023. However, there is a slight decline observed in mid-2024, where invested capital drops marginally to about 14.84 billion. This increase suggests ongoing investments and growth in the company’s capital base over time, with a minor retracement in the final period that might warrant further examination.

MVA Spread Ratio

The MVA spread ratio, indicative of value creation relative to invested capital, exhibits significant fluctuations but maintains an overall upward trajectory. It starts at 264.92% in mid-2019, surges impressively to over 617% by mid-2021, then declines to around 404.85% in mid-2022. After this dip, it resumes growth, ending at a peak of approximately 628.85% by mid-2024. This variation reflects periods of enhanced efficiency in generating market value from capital invested, alongside intervals of relative underperformance.

Summary Insights

Overall, the company's financial indicators reveal expansion and value creation over the six-year span, marked by robust market value addition and increased capital investment. The observed volatility, particularly around 2022, highlights possible external or internal factors impacting performance. The recovery and growth post-2022 imply effective strategic adjustments or market improvements. The slight decrease in invested capital in the final year contrasts with the continued rise in MVA and MVA spread ratio, suggesting enhanced capital efficiency or market valuation improvements. Monitoring these trends will be crucial for forecasting future financial health.

The analysis of the annual financial data reveals several notable trends related to market value added (MVA), adjusted revenue, and MVA margin over the six-year period ending June 30, 2024.

Market Value Added (MVA)

The MVA shows a general upward trajectory from 2019 to 2024, starting at approximately 25.97 billion USD in mid-2019 and peaking at around 93.32 billion USD by mid-2024. There was a substantial increase from 2019 to 2021, almost tripling in value, followed by a decline in 2022 to around 54.7 billion USD. Subsequently, MVA rebounded strongly in 2023 and continued its ascent in 2024. This pattern indicates strong market valuation growth over the medium term, with a significant but temporary dip in 2022.

Adjusted Revenue

Adjusted revenue consistently increased from 9.11 billion USD in 2019 to a peak of 18.31 billion USD in 2022. However, there was a decline in revenue for the year ending June 2023 and a further reduction by June 2024, where it stood at approximately 14.62 billion USD. The initial upward trend reflects robust revenue growth, but the recent two-year decline suggests emerging challenges impacting top-line performance.

MVA Margin

The MVA margin, expressed as a percentage, exhibited volatility throughout the period. It nearly doubled from 285.07% in 2019 to a high of about 497.72% in 2021. Thereafter, it sharply fell to 298.83% in 2022, then rose again to 448.84% in 2023, and significantly increased to 638.38% in 2024. These fluctuations suggest varying efficiency in generating market value relative to revenue, with the recent marked increase potentially reflecting improved capital market perceptions or better value creation despite the revenue decline.

In summary, although adjusted revenue growth tapered off and declined in the later years, the company demonstrated strong market value appreciation overall. The divergence between revenue and MVA margins in recent years may point to factors such as improved profitability, investor confidence, or strategic shifts enhancing shareholder value independently of revenue trends.