5
ASML Holding N.V. (ASML)
- Equity
- Netherlands
- Technology
RISK
RETURN
Key risk factors
Low default risk
Good trading liquidity
Resilient to price shocks
Key return factors
Very strong margins and returns
Greatly overvalued vs peers
Decent dividends
Company profileASML Holding N.V. develops, produces, markets, sells, and services advanced semiconductor equipment systems consisting of lithography, metrology, and inspection related systems for memory and logic chipmakers. The company provides extreme ultraviolet lithography systems; and deep ultraviolet lithography systems comprising immersion and dry lithography solutions to manufacture various range of semiconductor nodes and technologies. It also offers metrology and inspection systems, including YieldStar optical metrology solutions to measure the quality of patterns on the wafers; and HMI e-beam solutions to locate and analyze individual chip defects. In addition, the company provides computational lithography and software solutions to create applications that enhance the setup of the lithography system; and mature products and services that refurbish used lithography equipment and offers associated services. It operates in Japan, South Korea, Singapore, Taiwan, China, the Netherlands, Europe, the United States, and rest of Asia. The company was formerly known as ASM Lithography Holding N.V. and changed its name to ASML Holding N.V. in 2001. ASML Holding N.V. was founded in 1984 and is headquartered in Veldhoven, the Netherlands.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
47.20
45.10
PEG
2.00
-
P/B
24.30
15.80
P/S
12.80
12.10
P/FCF
140.10
45.40
EV/EBITDA
36.40
34.50
Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, and overvalued on P/FCF.
Performance: Mixed
Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 31ppts and its growth decelerated by 2ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.
Analyst view: Somewhat favourable
The average target price is 994 and suggests 8% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 1209.5. This translates into 31% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 746.6. This is equivalent to 19% downside potential in the worst case.
Profitability: Very strong
RoE
ASML Holding N.V. reported a return on equity (RoE) of 52.7% in the last 12 months, down from 62.0% in FY22. The market consensus projects an RoE of 48.8% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 18.2% in the last 12 months, a decrease from 19.2% in FY22. The market analysts predict that RoA will be 12.9% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 30.1%, above the peers. The consensus estimate for FY24 for RoCE is 28.8%, again ahead of the peers.
Net margin
EBITDA margin
Historically, ASML has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 27.5%, down from 28.4% in FY22. The company has reported strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 35.3% in the last 12 months, up from 35.2% in FY22.
RoIC / WACC = 5.1(excellent value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 5.1 in the past several years. This ratio implies a excellent shareholder value creation. Growth: Average
Revenue
EBITDA
EPS
Free cash flow
ASML reported revenue of EUR 26 102mn in the last 12 months, down 5% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 9% from FY23 to EUR 18.06. Market expects EPS to reach EUR 20.4 in FY24.Revenue growth has been moderate in the past several years (positive-to-neutral), while EBITDA growth has been steady. This all contributed to fast EPS growth (positive). FCF has fallen rapidly, far faster than EBITDA. We emphasize the highly volatile dynamics of EBITDA, EPS and FCF.
Dividends: Decent
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been low and below its peers. On average, the company pays dividends every four months.
Default risk: Low
The risk of default is low. We note strong positions in its industry, robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to excessive margin volatility, and poor working capital management.
Volatility: Modest
In normal market circumstances, ASML is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to average.
Stress-test: Resilient
In highly turbulent market conditions, ASML is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low.
Selling difficulty: Low
ASML boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and is average on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.