Lam Research (LRCX): fair value

Fair-value band

The normal range for this name runs from $101 (cheap) to $354 (expensive); it is now priced at $272.

That is 0.5σ above this name's own normal premium.

Is Lam Research undervalued?

Fair, relative to its own history. Lam Research trades at $272, 139% above the fair value this model estimates, but it has habitually traded 100% above fair value, and today's gap is 0.5σ above that norm, within the range it normally trades in, so the verdict is Fair: priced normally for itself, not necessarily fairly valued.

Diligence checklist

8 pass · 2 fail · 1 no data

• PASSCash actually collected from profit, last 12 months: 115%XBRL · Lam Research gets $1.15 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.
• FAILGap between paper profit and real cash: +6.3%XBRL · Lam Research booked more profit than it collected, by 6.3% of everything it owns. I flag anything past 5% either way, and this is the direction that worries me: the further profit runs ahead of cash, the more of it is an accounting entry waiting to be reversed.
• PASSDebt compared to one year of cash earnings: -0.22xXBRL · Lam Research holds more cash than debt, so there is no leverage question to answer here. A balance sheet in this shape can fund a bad year out of its own pocket instead of asking a lender for permission.
• PASSHow much more it earns on capital than that capital costs: +27.34ppXBRL · Return on capital is far higher than what that capital costs, so every dollar Lam Research puts to work turns into much more than a dollar of value. A +27 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: $4.6MEDGAR · Insiders at Lam Research sold $4.6M 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: Mayer Bethany $3.0M, Harter Ava $1.6M. A further $101.5M 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 ↗
• PASSHow long the CEO has run this company: 7.8 yearsTEXT · Lam Research's chief executive has held the job since December 6, 2018, which is 7.8 years and covers a full cycle: good years and bad ones, both on this person's record. That is long enough for the record to mean something. Time served isn't the same as doing the job well, though, so read this next to the return-on-capital line above, which covers the same years. filing ↗
• PASSProfit margin held up during the last sales slump: 47.5% vs 45.7% baseXBRL · The last time Lam Research's revenue fell, its profit margin per unit sold only slipped a little, from about 45.7% to 47.5%. It means Lam Research 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 4 quarters from September 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 21.6% vs 26.9% medianXBRL · Lam Research's current cash margin (21.6%) sits a little below its long-run average (26.9%). 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 15.8% in June 2022 and 35.1% in December 2023.
• N/AHow much of the stock trades on an average day: $2,856MMARKET · Lam Research 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: 17%TEXT · Lam Research's August 7, 2026 10-K names a customer at 17% of revenue, in its own words: "In fiscal year 2024, one customer accounted for approximately 17 % of total revenues, respectively". 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 ↗
• FAILWhether the company switched auditors in the last 2 years: yes, 2025-09-11EDGAR (dealbreaker) · Companies sometimes switch the accounting firm that signs off their books right before something bad is uncovered, which is why I look. Lam Research changed auditors on September 11, 2025. The change itself is a hard fact; the reason for it is written in prose, so read the filing before treating this as the red flag it may be. filing ↗