OOT — Out of Town This Week — Lam Research (NYSE: LRCX)
I’ve been invited to do some work with the good folks at Martin Army Medical Center, Fort Benning, GA this week and will be out of town and away from this blog until at least the weekend. This is the first of several planned consulting trips this summer (Chicago and New York City in June and Charleston in July). If posting comments, there may be a delay before I’m able to approve them and get them posted for public consumption.
Next, we turn to analysis of Lam Research.
Lam Research is up over 5 percent this morning, which is unfortunate. I’d planned to post analysis of the stock after the Columbus trip.
Since buying, the stock has declined as much as 8 percent, and I was preparing to buy more when it rebounded this morning. While I don’t have time for posting a full analysis, here are my assumptions for future free cash flow growth.
Which renders an estimate of intrinsic value via Discounted Cash Flows of:
Sensitivity analysis based on discount rate and adjustments:
Compounded Annual Growth Return at the previous growth assumptions:
It does sell at a marginally rich price-to-adjusted-book-value.
But Earnings-Power Value has exceeded Replication Value in each of the last ten years.
It ranks high by Piotroski:
And offers an excellent margin of safety.
As for the financials, I’ll leave it to the reader to do this analysis. There were some marginal negatives in 2007 that prompted the recent declines (ROIC decline, especially) and the market is concerned about the economy and product demand over the near-term — which management believes is over-blown. In other words, the reader is advised to perform their own due diligence (as always), but I’m sold on the company and satisfied that the stock sells at a sufficient discount to make it attractive at these levels.
And now I need to prepare for a trip to my old home town of Columbus, Georgia (spent my 8th grade year there back when Moses was inventing wine). By the way, the most memorable thing that happened to me during that year was meeting James Brown, the Godfather of Soul, and that was plenty memorable.
