LRCX

On business quality, Lam is hard to fault. FY2025 revenue rose 23.7% to $18.4B with net income up 40.0% to $5.36B and diluted EPS up 43.1% to $4.15. Margins are elite — 48.7% gross, 32.0% operating, 29.1% net — and return on equity is an exceptional 54.3%. The balance sheet is a fortress: $6.39B cash against $4.47B total debt ($3.72B long-term, down 16.7%, plus $750M current), so the company is roughly net cash. It also converts to real cash, with $6.17B operating cash flow against just $759M capex (~$5.4B free cash flow), and returned ~$4.6B to holders via $3.42B of buybacks and $1.15B of dividends. The eye-catching +874.5% jump in shares is the October 2, 2024 ten-for-one split, not dilution.

The problem is price against cycle. This is a cyclical wafer-fab-equipment business: revenue ran $14.6B→$17.2B→$17.4B→$14.9B→$18.4B from FY2021–FY2025, and FY2024 showed how quickly it reverses (revenue −14%, net income −15% versus the prior year). FY2025's record looks like a cyclical high, yet the stock trades at 93.7x diluted EPS and 26.7x sales. Paying a near-94x multiple for arguably peak earnings leaves no margin of safety — in a downcycle both the 'E' and the multiple compress at once. Valuation, not fundamentals, is what makes this a sell.