Momentum Meets Value: KLA Stock Could Be A Good Buy

We think KLA (KLAC) stock might be a good investment candidate. Why? Because you get strong margins, a 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 stock can run given its good fundamentals and the fact that it is 15% below its 52-week high.

KLA’s recent Q2 FY26 results show high operating margins, driven by strong service revenue growth and manufacturing efficiencies from an optimal product mix. The debt-to-equity ratio stood at 1.22 in Q1 FY26, supported by record quarterly free cash flow. Momentum stems from robust customer demand, fueled by AI infrastructure buildout, leading to significant order backlogs and extended customer lead times. Advanced packaging systems revenue grew over 70% in calendar 2025, projected to continue strong in 2026, signaling sustained product relevance. While H1 2026 revenue growth faces supply constraints, acceleration is expected in H2, informed by expanding market share. Shares saw initial post-earnings volatility but quickly rebounded.

And Its Fundamentals Look Good

• Long-Term Profitability: About 35.7% 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 17.5% LTM and 7.3% for the last 3-year average, but this is not a growth story
• Room To Run: Despite its momentum, KLAC stock is trading 15% 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, and 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. Amphenol (APH)
2. Newmont (NEM)
3. Barrick Mining (B)

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 fulfill 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%

Portfolios Win When Stock Picks Fall Short

Stocks can jump or crash but long term success comes from staying invested. The right portfolio helps you ride gains and cushion single stock drops

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, 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. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.