KLA Corporation (KLAC) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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KLA Corporation (KLAC)

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Intrinsic Value (DCF)

Current$1,544.96

→

Intrinsic$1,041.13

-33%

$686.38$1,041.13$1,745.93

Growth 25%

Discount 10%

Terminal 3%

Current price reflects execution expectations above 25% growth — not unreasonable for quality businesses.

Range: Bear $686 → Bull $1746. Current price implies expectations above the base case, closer to bull expectations.

Discount ↓Growth →	21%	23%	25%	27%
8%	$1329	$1439	$1556	$1681
10%	$891	$964	$1041	$1123
12%	$660	$713	$770	$830
14%	$518	$559	$603	$650

Bull Case

Bull case ($1746) offers 13% upside at 30% growth, 8% discount

Bear Case

Bear case ($686) implies 56% downside at 20% growth, 12% discount
Trading 33% above base case — execution must exceed assumptions to justify
Using 25% growth — aggressive, watch for mean reversion

Intrinsic Value vs Current Price

5-Year Cash Flow Projection

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5-Year Free Cash Flow Projection

Year 1$4.68B

Year 2$5.85B

Year 3$7.31B

Year 4$9.13B

Year 5$11.42B

Terminal$180.94B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)

Discount Rate9.5%WACC estimate

Terminal Growth3.0%Perpetuity rate

Base Free Cash Flow$3.74BTTM actual

Bear g×0.8, r+2%

Base Historical CAGR

Bull g×1.2, r−1.5%

ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

Frequently Asked Questions

Is KLAC stock undervalued or overvalued?

🔴 OVERVALUED

KLAC trades at $1544.96 vs. our DCF-derived intrinsic value of $698.83, implying -50% downside. Using a 9.5% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($1051.19) suggests limited upside.

What is KLAC's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.74B, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $4.01B net debt and dividing by 0.13B shares: Bear $458.46 | Base $698.83 | Bull $1051.19. Current price $1544.96 implies -50% to base case.

How is KLAC's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($97.48B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.

KLA Corporation (KLAC) Intrinsic Value