ASML Stock Study (6-17-24)
Posted by Mark on July 29, 2024 at 06:43 | Last modified: June 17, 2024 13:21I recently did a stock study on ASML Holding N.V. ADR (ASML) with a closing price of $1027.90.
M* writes:
> ASML is the leader in photolithography systems used in the
> manufacturing of semiconductors. Photolithography is the
> process in which a light source is used to expose circuit
> patterns from a photo mask onto a semiconductor wafer.
> The latest technological advances in this segment allow
> chipmakers to continually increase the number of transistors
> on the same area of silicon, with lithography historically
> representing a high portion of the cost of making
> cutting-edge chips. ASML outsources the manufacturing of
> most of its parts, acting like an assembler. ASML’s main
> clients are TSMC, Samsung, and Intel.
Over the last 10 years, this large-size company has grown sales and earnings at annualized rates of 17.8% and 23.8%, respectively. Lines are up, mostly straight, and parallel.
Over the past decade, PTPM leads peer and industry averages while increasing from 21.8% (’14) to 33.0% (’23) with a last-5-year mean of 30.3%. ROE lags behind peer and industry averages despite increasing from 17.5% (’14) to 63.9% (’23) with a last-5-year mean of 46.1%. Debt-to-Capital is lower than peer and industry averages despite increasing from 13.3% (’14) to 25.6% (’23) with a last-5-year mean of 26.9%.
Per M*, Quick Ratio is 0.76. Neither M* nor Value Line list Interest Coverage, but from 2023 Form 20-F I get 50.8 [“Total comprehensive income, net of taxes” 7755.7 (p.239) and 2023 interest expense of 152.7 (p.273)]. M* rates the company “Exemplary” for Capital Allocation and “Wide” for economic moat. Value Line gives a Financial Strength grade of A.
With regard to sales growth:
- YF projects YOY 1.6% and 32.4% for ’24 and ’25, respectively (based on 19 analysts).
- Zacks projects YOY 1.3% contraction and 36.2% growth for ’24 and ’25, respectively (3 analysts).
- Value Line projects 10.5% annualized growth from ’23-’28.
- CFRA projects 1.1% YOY contraction and 15.4% growth per year for ’24 and ’23-’25, respectively.
- M* provides a 2-year ACE of 15.4% per year and projects 10.0% over the next decade in its analyst note.
I am forecasting near the bottom of the range at 8.0% per year.
With regard to EPS growth:
- MarketWatch projects 20.3% per year for ’23-’25 and ’23-’26 (based on 39 analysts).
- Nasdaq.com projects 55.0% YOY and 38.1% per year for ’25 and ’24-’26 (6/6/2 analysts for ’24/’25/’26).
- Seeking Alpha projects 4-year annualized growth of 22.8%.
- YF projects YOY 3.2% contraction and 56.4% growth for ’24 and ’25, respectively (20), along with 5-year annualized growth of 21.5%.
- Zacks projects YOY 6.6% contraction and 55.0% growth for ’24 and ’25, respectively (6), along with 5-year annualized growth of 23.5%.
- Value Line projects 15.5% annualized growth from ’23-’28.
- CFRA projects 5.3% YOY contraction and 22.5% growth/year for ’24 and ’23-’25 along with 3-year CAGR of 28.0%.
- M* projects long term annualized growth of 17.1%.
My 14.0% per year forecast is below the range of five long-term estimates (mean 20.1%). Initial value is ’23 EPS of $21.54/share instead of 2024 Q1 EPS of $19.59 (annualized).
My Forecast High P/E is 30.0. Over the past decade, high P/E ranges from 29.6 in ’16 to 53.8 in ’22 with a last-5-year mean of 47.4 and a last-5-year-mean average P/E of 35.7. I am near the bottom of the range (only ’16 is less).
My Forecast Low P/E is 20.0. Over the past decade, low P/E ranges from 19.7 in ’17 to 28.9 in ’21 with a last-5-year mean of 24.0. I am forecasting near the bottom of the range (only ’17 is less).
My Low Stock Price Forecast (LSPF) is $718.00. Default based on initial value given above is unreasonably low at 58.1% less than the previous closing price. My (arbitrary) forecast is 30.1% less than the previous closing price but still 27.3% greater than the 52-week low.
Over the past decade, Payout Ratio (PR) ranges from 21.3% in ’15 to 51.1% in ’19 with a last-5-year mean of 35.9%. I am forecasting below the range at 21.0%.
These inputs land ASML in the HOLD zone with a U/D ratio of 0.7. Total Annualized Return (TAR) is 4.6%.
PAR (using Forecast Average—not High—P/E) of 1.0% is less than I seek for a large-size company. If a healthy MOS anchors the study, then I can proceed based on TAR instead.
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 119 studies done in the past 90 days (my study and 49 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 13.7%, 15.7%, 43.2, 24.0, and 34.9%, respectively. I am lower across the board. Value Line projects a future average annual P/E of 40.0 that is greater than MS (33.6) and mine (25.0).
MS high / low EPS are $42.17 / $19.59 versus my $41.48 / $21.54 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $45.00 is greater than both.
MS LSPF of $495.00 implies a Forecast Low P/E of 25.3 versus the above-stated 24.0. MS LSPF is 5.3% greater than the default $19.59/share * 24.0 = $470.16, which results in more aggressive zoning. MS LSPF is 31.1% less than mine, however.
TAR (over 15.0% preferred) is much less than MS 13.8%. Despite a higher LSPF, MOS is robust in the current study.
With regard to valuation, PEG is 2.2 and 3.3 per Zacks and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is very expensive at 1.5.
The stock is up ~34% over the past 12 months per Value Line and trading near its 52-week high. For my style of investing, that is too hot to handle.
U/D has ASML a BUY under $847/share while the BI TAR criterion will be satisfied ~$622 given a forecast high price of $1244.
Categories: BetterInvesting® | Comments (0) | Permalink