Was Lam Research Corporation's (NASDAQ:LRCX) Earnings Decline Part Of A Broader Industry Downturn?
After reading Lam Research Corporation's (NASDAQ:LRCX) most recent earnings announcement (30 June 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
View our latest analysis for Lam Research
How Did LRCX's Recent Performance Stack Up Against Its Past?
LRCX's trailing twelve-month earnings (from 30 June 2019) of US$2.2b has declined by -7.8% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 32%, indicating the rate at which LRCX is growing has slowed down. Why is this? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Lam Research has invested its equity funds well leading to a 47% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 18% exceeds the US Semiconductor industry of 7.9%, indicating Lam Research has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Lam Research’s debt level, has increased over the past 3 years from 11% to 26%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research Lam Research to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for LRCX’s future growth? Take a look at our free research report of analyst consensus for LRCX’s outlook.
Financial Health: Are LRCX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
