KLA (KLAC): fair value

Fair-value band

The normal range for this name runs from $33 (cheap) to $119 (expensive); it is now priced at $166.

Is KLA undervalued?

Expensive. KLA trades at $166, 118% above the fair value this model estimates; the normal range for this name runs from $33 (cheap) to $119 (expensive).

Diligence checklist

9 pass · 0 fail · 2 no data

• PASSCash actually collected from profit, last 12 months: 109%XBRL · KLA gets $1.09 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• PASSGap between paper profit and real cash: +4.0%XBRL · KLA's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: 0.67xXBRL · KLA could pay off everything it owes, net of the cash it holds, with 0.67 of a single year's earnings. My limit for a name I would buy is three years, so debt is not a risk here.
• PASSHow much more it earns on capital than that capital costs: +24.00ppXBRL · Return on capital is far higher than what that capital costs, so every dollar KLA puts to work turns into much more than a dollar of value. A +24 point gap is wide: reinvesting is genuinely worth doing here, which is what makes growth valuable rather than merely expensive. The gap is wider than it was at the start of the window.
• PASSStock sold by executives and directors on the open market, last 6 months: $1.6MEDGAR · Insiders at KLA sold $1.6M of stock on the open market in the last 6 months, which is inside the $5 million line I draw. Selling that size is ordinary diversification rather than a signal about the business. The sellers: Hanley Jeneanne Michelle $1.0M, Kirloskar Virendra A $0.6M. A further $95.0M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• N/AHow long the CEO has run this company: n/aTEXT · I couldn't establish when KLA's current chief executive took the job: no appointment appears in the 8-K item 5.02 history.
• PASSProfit margin held up during the last sales slump: 60.7% vs 60.8% baseXBRL · The last time KLA's revenue fell, its profit margin per unit sold only slipped a little, from about 60.8% to 60.7%. It means KLA isn't being forced to cut prices to keep product moving, which is what a company with a weak competitive position has to do. This is the accounts talking, not the filing: I'm reading the 3 quarters from December 2023 to June 2024, measured against the year going into it, and a shift in what the company sold can imitate pricing power either way.
• PASSNormal profit margin across a full business cycle: FCF margin 29.5% vs 33.2% medianXBRL · KLA's current cash margin (29.5%) sits a little below its long-run average (33.2%). My valuation grows the average, so a soft patch doesn't get written into the value as if it were permanent. Across the window the margin ran between 29.5% in June 2026 and 36.3% in December 2025.
• N/AHow much of the stock trades on an average day: $1,687MMARKET · KLA trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• PASSShare of revenue from its single biggest customer: 19%TEXT · KLA's August 6, 2026 10-K names a customer at 19% of revenue, in its own words: "In each of the fiscal years ended June 30, 2026 and 2025, one customer accounted for approximately 19 % of total revenues". That's inside the quarter-of-revenue line where I stop work, but it is worth knowing whose buying decision moves the top line. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. KLA hasn't changed auditors in the last 2 years, so there's no such red flag here.