Lam Research CorporationLRCXNASDAQ
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DCF Valuation
DCF Valuation Summary
Strong Sell
Base Case: $175.78 per share
-25.4%
Upside to Target
Bear Case
$100.79
Base Case
$175.78
Current
$235.53
Bull Case
$229.87
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.78
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)12.49%
Cost of Debt
Pre-tax Cost of Debt3.97%
Tax Rate10.07%
After-tax Cost of Debt3.57%
Equity Weight (E/V)98.45%
Debt Weight (D/V)1.55%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (98.45% × 12.49%) + (1.55% × 3.57%)
= 12.35%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $22.4B | $30.9B | $34.7B | $37.4B | $41.7B |
| EBIT | $7.0B | $9.6B | $10.8B | $11.6B | $13.0B |
| Tax | $702M | $970M | $1.1B | $1.2B | $1.3B |
| NOPAT | $6.3B | $8.7B | $9.7B | $10.5B | $11.7B |
| + Depreciation | $420M | $580M | $651M | $701M | $783M |
| - Capex | $620M | $856M | $961M | $1.0B | $1.2B |
| - Δ NWC | $836M | $642M | $265M | $285M | $318M |
| Free Cash Flow | $5.2B | $7.7B | $9.1B | $9.8B | $11.0B |
| Discount Factor | 0.890 | 0.705 | 0.559 | 0.442 | 0.312 |
| Present Value | $4.7B | $5.5B | $5.1B | $4.4B | $3.4B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$11.0B
Terminal Growth Rate10.81%
WACC12.35%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$609.2B
PV of Terminal Value$190.0B
Exit Multiple Method
Year 10 EBITDA$13.8B
Exit Multiple (EV/EBITDA)38.9x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$535.4B
PV of Terminal Value$167.0B
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$45.9B
PV of Terminal Value$190.0B
Enterprise Value$235.9B
(-) Net Debt-$1.6B
Equity Value$237.6B
Shares Outstanding$1.3B
Price per Share$184.73
Exit Multiple Method
PV of Projected FCFs$45.9B
PV of Terminal Value$167.0B
Enterprise Value$212.9B
(-) Net Debt-$1.6B
Equity Value$214.6B
Shares Outstanding$1.3B
Price per Share$166.83
Base Case Fair Value
$175.78
Average of perpetuity growth and exit multiple methods
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 9.81% | 10.31% | 10.81% | 11.31% | 11.81% |
|---|---|---|---|---|---|
| 10.35% | $190.65 | $184.61 | $178.83 | $173.31 | $168.02 |
| 11.35% | $190.65 | $184.61 | $178.83 | $173.31 | $168.02 |
| 12.35% | $152.20 | $181.08 | $178.83 | $173.31 | $168.02 |
| 13.35% | $112.65 | $125.49 | $143.39 | $170.05 | $168.02 |
| 14.35% | $91.02 | $97.98 | $106.91 | $118.78 | $135.32 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$100.79
-57.2% vs current
- • -25% vs analyst consensus
- • Terminal growth: 10.3%
- • Beta: 2.22
Base Case
$175.78
-25.4% vs current
- • Analyst consensus
- • Terminal growth: 10.8%
- • Beta: 1.78
Bull Case
$229.87
-2.4% vs current
- • +25% vs analyst consensus
- • Terminal growth: 11.3%
- • Beta: 1.51
Key Assumptions & Drivers• Technology Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth21.46%
Year 3 Revenue Growth10.91%
Year 5 Revenue Growth3.75%
Year 7 Revenue Growth3.75%
Year 10 Revenue Growth3.75%
Terminal Growth Rate10.81%
Margin & Efficiency
EBIT Margin31.15%
Tax Rate10.07%
Capex / Revenue2.77%
NWC / Revenue21.12%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (S&P 500: 22x P/E)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.