ASML Could Significantly Outperform Over The Next 5 Years
What Makes a Compounder?
"Compounder" has become a buzzword in investment circles, but we define it simply: a company that delivers higher-than-average returns for longer-than-average periods.
The formula is basic economics - a compounder excels at both sides of the supply-demand equation:
Demand side: Growing revenue and profits drives investor interest
Supply side: Reducing share count increases each investor's ownership percentage
Why ASML Makes the Cut
ASML demonstrates classic compounder characteristics:
Growing Demand
- Revenue growth from 11B in 2018 to 32B today
- Net income increase from $2.6B to $9.3B in the same period
- Dominance in advanced chip manufacturing equipment, particularly EUV and DUV technology
Decreasing Supply
- Consistent share count reduction through buyback programs
- Management's clear focus on shareholder value
Why Now Is the Time to Buy
The current buying opportunity exists because:
- ASML is trading at the lower end of its historical P/E and P/S ranges
- The recent drawdown is among the deepest in years, comparable only to the 2022 tech slowdown
- The current pullback reflects cyclical semiconductor industry dynamics, not fundamental issues
- TTM revenue has already hit all-time highs, but the stock hasn't caught up
Risks to Consider
- Potential semiconductor manufacturer CAPEX delays affecting ASML's backlog
- Geopolitical risk with Taiwan, where many customers including TSMC are located
- Premium valuation relative to broader market
"Compounder" has become a buzzword in investment circles, but we define it simply: a company that delivers higher-than-average returns for longer-than-average periods.
The formula is basic economics - a compounder excels at both sides of the supply-demand equation:
Demand side: Growing revenue and profits drives investor interest
Supply side: Reducing share count increases each investor's ownership percentage
Why ASML Makes the Cut
ASML demonstrates classic compounder characteristics:Growing Demand
- Revenue growth from 11B in 2018 to 32B today
- Net income increase from $2.6B to $9.3B in the same period
- Dominance in advanced chip manufacturing equipment, particularly EUV and DUV technology
Decreasing Supply
- Consistent share count reduction through buyback programs
- Management's clear focus on shareholder value
Why Now Is the Time to Buy
The current buying opportunity exists because:
- ASML is trading at the lower end of its historical P/E and P/S ranges
- The recent drawdown is among the deepest in years, comparable only to the 2022 tech slowdown
- The current pullback reflects cyclical semiconductor industry dynamics, not fundamental issues
- TTM revenue has already hit all-time highs, but the stock hasn't caught up
Risks to Consider
- Potential semiconductor manufacturer CAPEX delays affecting ASML's backlog
- Geopolitical risk with Taiwan, where many customers including TSMC are located
- Premium valuation relative to broader market
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.