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KLA (KLAC) Gains But Lags Market: What You Should Know

Zacks Equity Research

KLA (KLAC) closed the most recent trading day at $175.46, moving +0.11% from the previous trading session. The stock lagged the S&P 500's daily gain of 0.45%. Meanwhile, the Dow gained 0.49%, and the Nasdaq, a tech-heavy index, added 0.67%.

Prior to today's trading, shares of the maker of equipment for manufacturing semiconductors had gained 0.92% over the past month. This has lagged the Computer and Technology sector's gain of 2.67% and the S&P 500's gain of 2.44% in that time.

Wall Street will be looking for positivity from KLAC as it approaches its next earnings report date. The company is expected to report EPS of $2.54, up 4.1% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.47 billion, up 31.63% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $9.88 per share and revenue of $5.71 billion, which would represent changes of +16.78% and +24.97%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for KLAC. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. KLAC is currently a Zacks Rank #2 (Buy).

Digging into valuation, KLAC currently has a Forward P/E ratio of 17.74. Its industry sports an average Forward P/E of 21.71, so we one might conclude that KLAC is trading at a discount comparatively.

It is also worth noting that KLAC currently has a PEG ratio of 1.5. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Electronics - Miscellaneous Products stocks are, on average, holding a PEG ratio of 1.99 based on yesterday's closing prices.

The Electronics - Miscellaneous Products industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 71, which puts it in the top 28% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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