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The Dutch company seems to have escaped the delicate situation in the semiconductor sector for several quarters.
Although orders fell by a third compared to the previous year, sales recorded growth of 30%. This value doubles in three years, although the cycle has reversed quite dramatically since the containment difficulties associated with the pandemic.
ASML’s customers are suffering more than the group – at least for now. The latter, as we know, defends excellent competition: supported by a real technology monopoly, it sells ultraviolet lithography equipment to chip and circuit manufacturers, achieving the best margins in the industry.
Earnings per share will reach €19.9 in 2023, compared to €14.1 in 2022 and €7.18 five years ago. This exceptional performance brings the current valuation to almost 40 times earnings, well above the historical average over the past decade. Apparently the market is paying little attention to the decline in new orders.
In terms of cash flow, we note that cash generation this year was heavily impacted by the increase in working capital requirements, which absorbed €3.6 billion more than last year. However, we can assume that the glass is half full and attribute this to the growth of the group’s activities.
The free cash flow thus reached 3.3 billion euros. 2.3 billion euros will be distributed in the form of dividends and the remaining billion will be diverted into share buybacks – we like an orderly balance sheet at ASML. The financial situation remains excellent with a liquidity surplus of 2 to 2.5 billion euros.
Return on equity reached 70%, a historical record, exceedingly higher than the smoothed average of previous cycles, which hovered closer to 15% to 20%. Here we can only question the sustainability of such outperformance.
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