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KLA-Tencor Corporation Stock Buy Recommendation Reiterated (KLAC)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- KLA-Tencor Corporation (Nasdaq:KLAC) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.89% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, KLAC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Although KLAC's debt-to-equity ratio of 0.23 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.78, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for KLA-TENCOR CORP is rather high; currently it is at 62.10%. Regardless of KLAC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KLAC's net profit margin of 27.80% compares favorably to the industry average.
  • Along with the stagnant revenue growth, the company underperformed against the industry average of 13.5%. Since the same quarter one year prior, revenues have remained constant. The stagnant revenue growth has not kept the company from increasing earnings per share.

KLA-Tencor Corporation designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries. The company has a P/E ratio of 11.8, equal to the average electronics industry P/E ratio and below the S&P 500 P/E ratio of 17.7. KLA-Tencor has a market cap of $8.7 billion and is part of the technology sector and electronics industry. Shares are up 8.2% year to date as of the close of trading on Thursday.

You can view the full KLA-Tencor Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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