On August 03, 2026, we conducted a DCF analysis for Lam Research Corp LRCX, a company that has shown significant price performance fluctuations recently. Over the past year, LRCX has seen a remarkable increase of 210.7%, although it has faced a sharp decline of 32.4% in the last month alone.
- DCF Earnings-based intrinsic value vs price: $181.88 vs $293.02 (margin of safety: -61.1%)
- DCF FCF-based intrinsic value vs price: $110.26 (second opinion)
- GF Score™: 81/100, indicating a moderate reliability of the DCF inputs
What Is LRCX Worth? DCF Earnings-Based Model
The DCF earnings-based model indicates that LRCX is significantly overvalued. The model operates in two stages: a growth phase for the first ten years followed by a terminal phase. The assumptions used in this model are crucial for understanding the intrinsic value.
| Parameter | Value |
|---|---|
| Current EPS (TTM, excl. non-recurring) | $5.82 |
| 10-Year Growth Rate | 21.9% |
| 10-Year Treasury Rate | 4.68% |
| Discount Rate (ceil(Treasury) + 6%) | 11% |
| Terminal Growth Rate | 4% |
In the growth phase, the EPS is expected to grow at 21.9% per year for the first ten years, discounted at a rate of 11%. The terminal phase assumes a slower growth rate of 4% for the subsequent ten years. Below is the summary of the calculations:
| Stage | Description | Value |
|---|---|---|
| Growth Stage (Years 1-10) | EPS growing at 21.9%, discounted at 11% | $88.91 |
| Terminal Stage (Years 11-20) | 4% terminal growth, discounted at 11% | $92.97 |
| Intrinsic Value | Growth + Terminal | $181.88 |
With the current price at $293.02, the intrinsic value of $181.88 indicates that LRCX is significantly overvalued, reflecting a margin of safety of -61.1%. It is important to note that GuruFocus uses EPS excluding non-recurring items, as research shows stock prices correlate more closely with earnings than with free cash flow. For further details, you can check the LRCX DCF Calculator.
What Does the Free Cash Flow DCF Say?
The free cash flow (FCF) based intrinsic value for LRCX is calculated at $110.26. This figure further supports the conclusion drawn from the earnings-based DCF model, as both models indicate that LRCX is significantly overvalued, with a margin of safety of -165.8%.
How Does GF Value™ Compare to the DCF Models?
The GF Value™ for LRCX stands at $143.76, providing another perspective on the stock's valuation. This proprietary measure from GuruFocus is derived from historical trading multiples, past business growth, and future performance estimates. All three models—earnings-based DCF, FCF-based DCF, and GF Value™—concur that LRCX is overvalued. For more information, visit the GF Value™ page.
What Does LRCX's GF Score™ Tell Us?
The GF Score™ evaluates a company's financial strength, profitability, growth potential, valuation, and momentum. LRCX has a GF Score™ of 81/100, indicating solid fundamentals, but its predictability rank is low at 1 out of 5 stars. This lower predictability suggests that the DCF model may be less reliable for this stock.
| Metric | Rating |
|---|---|
| GF Score™ | 81/100 |
| Financial Strength | 8/10 |
| Profitability | 10/10 |
| Growth | 10/10 |
| Valuation | 1/10 |
| Momentum | 3/10 |
For more details, you can visit the LRCX stock page.
Key Assumptions and Limitations
It is important to note that DCF models are highly sensitive to the assumptions made regarding growth and discount rates. Stocks with low predictability ratings, such as LRCX, yield less reliable DCF estimates. The terminal growth rate of 4% is a simplifying assumption that may not fully capture future performance.
What This Means for Investors
In summary, all three valuation models—DCF earnings, DCF FCF, and GF Value™—indicate that LRCX is significantly overvalued. The consensus among these models suggests caution for potential investors. Additionally, the guru ownership signal shows that 19 gurus currently hold the stock, with 8 adding and 11 trimming their positions in recent quarters, while insiders have sold a total of $64.0M in the last three months. This insider selling, combined with the valuation consensus, raises concerns about the stock's future performance. For further insights, explore the LRCX DCF Calculator.
Frequently Asked Questions
What is LRCX's intrinsic value based on DCF?
According to the analysis, the earnings-based intrinsic value is $181.88, while the FCF-based intrinsic value is $110.26.
Is LRCX overvalued or undervalued?
Both the DCF and GF Value™ models indicate that LRCX is overvalued.
How reliable is the DCF model for LRCX?
The DCF model's reliability is low, as indicated by a predictability rank of 1 out of 5 stars.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
