KLAC - Embedded Expectations Analysis - 2020 04 01
ï€ KLA Corporation (KLAC:USA) currently trades below recent averages relative toUAFRS-based (Uniform) earnings, with an 15.1x Uniform P/E, implying bearish expectations for the firm. However, management is confident about their operating model, revenue, and capital return program
ï€ Specifically, management is confident that their operating model is accomplished by driving sustained technology leadership and that the impact of the coronavirus will be similar to past disruptions in supply in their industry's history. Moreover, they are confident that their Other Products segment made up 4% of revenues in Q4 2020 and that metrology requirements for 3D structures have increased meaningfully. Also, they are confident in their capital return program and that process control intensity being flat is a function of memory adoption being higher than it's been historically
KLA is a supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. The company provides process control and process-enabling solutions for manufacturing and testing wafers and reticles, integrated circuits, packaging, light emitting diodes, power devices, compound semiconductor devices, microelectromechanical systems, data storage, printed circuit boards (PCBs), and flat and flexible panel displays, as well as general materials research. The company has four reportable segments which include Semiconductor Process Control; Specialty Semiconductor Process; PCB, Display and Component Inspection; and Other.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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