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Let's talk about the popular KLA-Tencor Corporation (NASDAQ:KLAC). The company's shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine KLA-Tencor’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is KLA-Tencor still cheap?
Good news, investors! KLA-Tencor is still a bargain right now. According to my valuation, the intrinsic value for the stock is $164.92, but it is currently trading at US$119 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because KLA-Tencor’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will KLA-Tencor generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 9.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for KLA-Tencor, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since KLAC is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on KLAC for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy KLAC. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on KLA-Tencor. You can find everything you need to know about KLA-Tencor in the latest infographic research report. If you are no longer interested in KLA-Tencor, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.