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 A-. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable 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.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 17.0%. Since the same quarter one year prior, revenues slightly increased by 4.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • KLAC's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.15, 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 58.10%. 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, the net profit margin of 15.84% trails the industry average.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Semiconductors & Semiconductor Equipment industry average, but is less than that of the S&P 500. The net income has decreased by 3.8% when compared to the same quarter one year ago, dropping from $110.80 million to $106.63 million.

KLA-Tencor Corporation designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor has a market cap of $8.8 billion and is part of the technology sector and electronics industry. The company has a P/E ratio of 13.00, below the S&P 500 P/E ratio of 18.00. Shares are up 10.7% year to date as of the close of trading on Friday.

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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