ASML Shares: Opportunities and Risks for Investors

What should you do with ASML Holding stock? You are not alone in seeking the answer to this question. The stock price recently closed at $1059.98, providing an impressive return of %51.3 year-to-date. However, it is quite natural to wonder whether there is more room for growth or if investors are securing their profits.

In the past week, ASML shares have gained %1.7, while last month they showed an increase of %11.4. Looking at the long-term picture, the numbers become even more impressive; last year saw an increase of %50.9, and over the past five years, the stock has gained over %200 in value. This positive trend is supported by news that global semiconductor demand is reviving and chip manufacturers are increasing their investments in advanced production capacity. Recently, ASML’s extreme ultraviolet lithography order book and market share have been closely monitored by analysts and investors. This situation places ASML in a critical position from a technological cycle perspective.

However, the valuation scenario is slightly more complex. According to six classic valuation metrics, ASML is rated only 2 points, indicating that the stock currently meets only a few valuation criteria.

ASML Holding's most recent 12-month free cash flow has been recorded at €8.56 billion. According to analyst forecasts, this figure is expected to increase steadily over the next five years, with Simply Wall Street projecting that ASML’s free cash flow will reach approximately €21.56 billion by 2035. These projections are supported by strong demand for the company’s advanced semiconductor equipment.

When we process these projections through a two-stage discounted cash flow (DCF) model, the calculated intrinsic value per share is found to be €708.06. Considering that the current stock price is $1,059.98, the DCF model indicates that the stock is trading at approximately %49.7 overvaluation.

Conclusion: HIGH VALUATION

The price-to-earnings (PE) ratio is a classic way to determine the value of profitable companies like ASML Holding. This ratio connects the company’s stock price to its earnings, giving investors a clear view of how much is paid for each dollar of profit. ASML is currently trading with a 37.2 times PE ratio, which is slightly below the average for similar companies at 37.6 times and the semiconductor industry average at 40.3 times. However, the “Fair Ratio” calculated by Simply Wall Street is determined to be 35.3 times.

The difference between the actual PE ratio and the Fair Ratio is just under 2 times. This situation indicates that the shares carry a modest premium based on current earnings. Conclusion: HIGH VALUATION

Another way to gain a deeper understanding of ASML Holding’s value is through “Stories.” A Story combines your belief about a company, your perspective on where it is headed, and your comparisons about future revenues, profit margins, and the fundamental value of the company. Stories help investors make informed decisions about when to buy or sell.

For example, some investors believe that ASML’s fair value is around $1,002.53, while others are acting with a lower expectation. Connect with our community to learn more about ASML Holding or to create your own Story!