The selloff in the markets in the last two months has been brutal. On the upside, some high quality tech stocks now have unheard of dividend yields and very appealing valuations. One that looks like a compelling bargain is KLA Tencor (KLAC).
KLA-Tencor Corporation engages in the design, manufacture, and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. It offers equipment comprising wafer and integrated circuit (IC) defect monitoring, review, and classification; reticle defect inspection and metrology; packaging and interconnect inspection; critical dimension metrology; pattern overlay metrology; film thickness, surface topography, and composition measurements; measurement of in-chamber process conditions, wafer shape, and stress metrology; computational lithography tools; and yield and fab-wide data management and analysis systems.
Business description from Yahoo Finance.
8 reasons to find value in KLAC at under $34 a share:
- It is selling at the bottom of its five year valuation range based on P/E, P/S and P/CF.
- KLAC has a robust balance sheet with approximately $8 a share in net cash.
- It provides a robust dividend yield of 4.1% and has raised its dividend payout an average of over 17% annually over the last five years.
- KLAC is within 10% of long term technical support (click on image to enlarge).
- The stock is priced at less than 8 times this year’s projected earnings and has beat earnings estimates each of the last four quarters.
- KLAC sells at less than 7 times operating cash flow and has a five year projected PEG of less than 1.
- The company’s revenue base is very diverse with only 24% of sales coming from North America and less than 10% from Europe.
- KLAC is selling significantly under analysts’ price targets. S&P has a price target of $48 a share on KLAC, Credit Suisse’s (CS) target price is $51 and Stifel Nicolas (SF) just raised its target on KLAC to $59.