Lam Research Corporation (LRCX) DCF Valuation & Fundamental Primer
Lam Research Corporation (LRCX) currently trades at $194.76 with an enterprise value of $504.67B. Our proprietary institutional model rates Lam Research Corporation at 82/100 (Grade: A · High-Quality Compounder). The current market price prices in an implied 5-year revenue CAGR of 4.3% vs. historical growth of 25.0% (Substantial Margin of Safety).
Institutional fundamental teardown of Lam Research Corporation (LRCX) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Lam Research Corporation (LRCX) 3-Scenario DCF Valuation Range
Stress-test LRCX's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $194.76).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $465.45 +139% | $494.60 +154% | $528.61 +171% | $568.80 +192% | $617.03 +217% |
| 9.3% | $418.21 +115% | $441.17 +127% | $467.54 +140% | $498.12 +156% | $534.02 +174% |
| 10.0% | $379.40 +95% | $397.86 +104% | $418.78 +115% | $442.70 +127% | $470.29 +141% |
| 10.8% | $346.97 +78% | $362.07 +86% | $378.99 +95% | $398.10 +104% | $419.84 +116% |
| 11.5% | $319.48 +64% | $332.00 +70% | $345.91 +78% | $361.46 +86% | $378.95 +95% |
Institutional Software Quality Scorecard (82/100 · Grade A)
Strong fundamentals, above-average cash generation, and robust competitive positioning.
Elite deferred revenue float; FCF exceeds operating income by >20%
Elevated equity dilution; SBC consumes substantial operating cash flow
Elite Tier-1 SaaS compounder with high gross margin and superior Rule of 40
Positive net cash cushion; self-funding operations with zero insolvency risk
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 190% of EBIT driven by upfront annual collections
- Top-quartile software unit economics: 82.6% gross margin and 58.4% Rule of 40 score
- Net cash positive: $21.34B balance sheet buffer
Key Operational & Dilution Risks
- Substantial SBC dilution drag: SBC is 20.9% of revenue ($9.47B)
Reverse-DCF Solver: What Growth is Priced Into LRCX?
The current share price only requires 4.3% 5-year CAGR (16.0% dilution-adjusted), well below historical growth of 25.0%. If the company maintains baseline execution, there is asymmetric upside.
Headline Reverse-DCF ignores Stock-Based Compensation (20.9% of revenue) and annual share dilution (1.8%/yr). Accounting for both requires 16.0% 5-year revenue CAGR to justify $194.76/sh on a true per-share economic cash flow basis.
Lam Research Corporation (LRCX) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $45.30B | $45.30B | $56.63B | $70.78B | $88.48B | $110.60B | $138.25B |
| Gross Profit | $37.42B | $37.42B | $46.77B | $58.47B | $73.08B | $91.35B | $114.19B |
| Operating Income (EBIT) | $7.97B | $7.97B | $9.97B | $12.46B | $15.57B | $19.47B | $24.33B |
| Stock-Based Compensation (SBC) | $9.47B | $9.47B | $11.83B | $14.79B | $18.49B | $23.11B | $28.89B |
| Unlevered Free Cash Flow (FCF) | $15.13B | $15.13B | $18.91B | $23.64B | $29.55B | $36.94B | $46.17B |
| SBC-Adjusted True Cash Flow | $5.66B | $5.66B | $7.08B | $8.85B | $11.06B | $13.82B | $17.28B |
Software & Cloud Services Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = -17.0 + 0.53 × (Rule of 40) · R² = 33%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Lam Research Corporation | LRCX | $244.62B | $45.30B | 82.6% | 33.4% | 58.4% | 20.9% | 4.9× |
| ServiceNow | NOW | $152.61B | $10.98B | 79.2% | 31.1% | 54.2% | 15.9% | 13.9× |
| Workday, Inc. | WDAY | $50.35B | $8.00B | 75.0% | 27.4% | 43.9% | 19.0% | 6.4× |
| Salesforce | CRM | $217.10B | $37.90B | 77.2% | 32.8% | 42.8% | 8.4% | 5.8× |
| Datadog | DDOG | $46.05B | $2.68B | 80.8% | 31.1% | 57.7% | 21.3% | 17.4× |
| Snowflake Inc. | SNOW | $71.79B | $3.63B | 66.5% | 25.2% | 57.7% | 40.8% | 20.0× |
| Hubspot | HUBS | $19.89B | $2.63B | 85.0% | 21.3% | 52.7% | 19.2% | 7.7× |
| Peer Cohort Median Benchmark (N=6) | 78.2% | 29.2% | 53.5% | 19.1% | 10.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 4.9× | $223.29B | $244.62B | $194.76 | 0.0% |
| -20% Multiple Compression | 3.9× | $178.63B | $199.97B | $159.21 | -20.0% |
| -35% Multiple Compression | 3.2× | $145.14B | $166.47B | $132.54 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $226.50B | $247.84B | $197.32 | +1.4% |
Frequently Asked Questions: Lam Research Corporation (LRCX) Valuation
What is Lam Research Corporation (LRCX)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Lam Research Corporation (LRCX) has a Base Case implied value of $418.78 per share (with a Bear Case of $175.67 and a Bull Case of $777.39), compared to its current price of $194.76. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Lam Research Corporation (LRCX)'s Rule of 40 score and Free Cash Flow margin?
Lam Research Corporation achieves a Rule of 40 score of 58.4%, combining a 25.0% revenue growth run-rate with a 33.4% TTM free cash flow margin on $45.30B in trailing twelve-month revenue. In the Software & Cloud Services peer cohort, the median Rule of 40 benchmark is 53.5%.
What revenue growth rate is priced into LRCX stock according to Reverse-DCF analysis?
At $194.76 per share (Enterprise Value of $223.29B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 4.3%, compared to Lam Research Corporation's historical CAGR of 25.0%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Lam Research Corporation compare to Software & Cloud Services software peers?
Lam Research Corporation (LRCX) earns an institutional Software Quality Score of 82/100 (Grade A — High-Quality Compounder). Across its Software & Cloud Services peer group (NOW, WDAY, CRM, DDOG, SNOW), the cohort trades at a median EV/TTM Revenue multiple of 10.8× and a median gross margin of 78.2%.
How does Stock-Based Compensation (SBC) impact Lam Research Corporation (LRCX)'s valuation?
Lam Research Corporation recorded $9.47B in TTM stock-based compensation (20.9% of revenue). When treating SBC as a cash-equivalent compensation expense, Lam Research Corporation's SBC-adjusted free cash flow yield is 2.3%, scoring 10/25 on our Shareholder Dilution Friction pillar.