KLA Corporation has been on fire lately. In the past six months alone, the company’s stock price has rocketed 65.2%, reaching $1,459 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy KLAC? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Are We Positive On KLA Corporation?
Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ:KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, KLA Corporation grew its sales at an impressive 16% compounded annual growth rate. Its growth surpassed the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
2. Elite Gross Margin Powers Best-In-Class Business Model
Gross profit margin is a key metric to track because it shows how much money a semiconductor company gets to keep after paying for its raw materials, manufacturing, and other input costs.
KLA Corporation’s gross margin is one of the best in the semiconductor sector, and its differentiated products give it strong pricing power. As you can see below, it averaged an elite 60.7% gross margin over the last two years. That means KLA Corporation only paid its suppliers $39.30 for every $100 in revenue. 
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
KLA Corporation has shown terrific cash profitability, and if sustainable, puts it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the semiconductor sector, averaging an eye-popping 32.8% over the last two years.
Final Judgment
These are just a few reasons KLA Corporation is a rock-solid business worth owning, and after the recent rally, the stock trades at 35.6× forward P/E (or $1,459 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than KLA Corporation
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