KLA Stock May Still Have Room to Run

We think KLA (KLAC) stock might be a good investment candidate. Why? Because you get strong margin, low-debt capital structure, and strong momentum – with room to run as the stock is meaningfully below its 52-week high.

There Are Several Things In Favor Of KLAC Stock

KLAC is up 76% so far this year, but can still run more given its good fundamentals and the fact that it is 11% below its 52-week high.

KLA’s recent performance validates these strengths, driven by robust demand for advanced packaging and AI infrastructure, with related revenue expected to exceed $925 million in 2025, a 70% annual increase. The September 2025 quarter saw a 43% operating margin from a favorable product mix and manufacturing efficiencies, while the service business grew 16% year-over-year to $745 million.

Despite a projected deceleration in overall revenue growth for the next 12 months and export controls impacting China revenue, KLA’s robust free cash flow, totaling $3.9 billion over the past year, supports its low-debt capital structure. The stock’s year-to-date return of over 80% further underscores its strong momentum.

And Its Fundamentals Look Good

• Long-Term Profitability: About 34.0% operating cash flow margin and 38.9% operating margin last 3-year average.
• Strong Momentum: Currently in the top 10th percentile of stocks in terms of “trend strength” – our proprietary momentum metric.
• Revenue Growth: KLA saw revenue growth of 22.1% LTM and 8.7% last 3-year average, but this is not a growth story
• Room To Run: Despite its momentum, KLAC stock is trading 11% below its 52-week high.

Below is a quick comparison of KLAC fundamentals with S&P medians.

*LTM: Last Twelve Months

But Be Wary Of The Risks

While KLAC stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. KLAC took a hit of about 73% during the Dot-Com crash and roughly 75% in the Global Financial Crisis. The 2018 correction and Covid selloff brought dips around 32% and 37%, respectively. Even the recent inflation shock saw a drop of just over 40%. Sure, the company has solid fundamentals, but history shows that during market turmoil, deep pullbacks are pretty much par for the course. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read KLAC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want to see more details, read Buy or Sell KLAC Stock.

KLAC Is Just One of Several Such Stocks

You could also check out:

1. Lam Research (LRCX)
2. Newmont (NEM)
3. Ubiquiti (UI)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. High operating or (cash flow from operations) margins
3. No instance of very large revenue decline in the past 5 years
4. Low-debt capital structure
5. Strong momentum

A portfolio that was built starting 12/31/2016 with stocks that fulfil the criteria above would have performed as follows:

• Average 12-month forward returns of nearly 15%
• 12-month win rate (percentage of picks returning positive) of about 60%

A Multi Asset Portfolio Beats Picking Stocks Alone

Markets move differently but a mix of assets smooths volatility. A multi asset portfolio keeps you invested and reduces the impact of sharp drops in any single area.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices