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ASML Holding NV - Equity Analysis


Company description

ASML Holding NV is a Dutch multinational company founded in 1984, as a joint venture between Philips and ASM International. Initially, the name ‘Advanced Semiconductor Materials Lithography’ was chosen and used as ‘ASM Lithography’ to reflect the partners in the joint venture. Over time, this name has become simply ‘ASML’. ASML is one of the world’s leading manufacturers of chip-making equipment. Their customers are companies such as Intel, who use their machines in ‘fabs’ – microchip manufacturing plants – to create microchips that are eventually used in many electronic devices, including smartphones, laptops and much more. The company's headquarters, located in Veldhoven, (NL) comprises more than 16,800 employees. Current CEO, since July 1st, 2013 is Peter Wennink, former partner at the accounting and consulting firm Deloitte.

Core Business

  • EUV and DUV lithography systems: ASML is a world leader in the production of Extreme ultraviolet lithography systems and deep ultraviolet lithography systems, which differ in the wavelength generated. The introduction of this technology has made it possible to find room for more and more transistors on chips, significantly increasing their performance.

  • Refurbished systems: ASML is in charge of refurbishing their facilities, especially their historic PAS 5500, launched in 1991, to ensure new life for their machines. They claim that almost all the lithography systems they have ever shipped are still in use at the customer's factory.

  • Computational lithography: computational lithography is the set of mathematical and algorithmic approaches designed to improve the resolution achievable through photolithography.

ASML is pioneering this industry-leading technique, which minimizes the physical and chemical effects that interfere with the quality of a chip.



  • Product innovation: the company has a significant track record of success in new product development.

  • Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.

  • Highly skilled workforce through successful training and learning programs

  • High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.


  • Poor marketing - its product positioning is not clearly defined, which can lead to segment attacks by competitors.

  • High workforce dropout rate - compared to other organizations in the industry ASML Holding N.V. has a higher dropout rate and has to spend much more than its competitors on training and development of its employees.


  • Opening of new markets through government agreements - the adoption of new technology standards and the government free trade agreement have provided ASML with the opportunity to enter new markets.

  • New customers from the online channel - In recent years the company has invested large sums of money in the online platform. This investment has opened a new sales channel for ASML Holding. In the years to come, the company will be able to take advantage of this opportunity by getting to know its customers better and meeting their needs through big data analysis.


  • Liability Laws - liability laws in different countries differ, and ASML may be exposed to different liability claims due to changes in policies in those markets. The company may face lawsuits in various markets due to different laws and the constant fluctuation of product standards in those markets.

  • Lack of regular product supply - Over the years, the company has developed numerous products, but these are often dependent on the development of other players. Therefore, the supply of new products is not regular, leading to high and low fluctuations in the number of sales over time.



Basically, a company's profitability is the extent to which its total income exceeds its total expenses for any given period. Profitability can be measured using certain economic indices, such as ROE, ROIC, ROS, Net Revenue and Net Profit Margin.

  • ROE: Return on Equity is the measure of a company’s annual return divided by the value of its total shareholders’ equity, expressed as a percentage. In recent years, the company has recorded a steadily growing ROE, increasing from 17% as of Dec. 31, 2016, to 67% as of Dec. 31, 2022.The value peaked in the first quarter of 2023, reaching 80% and then dropping to 74% in the third quarter.

  • ROIC: Return on invested capital assesses a company's efficiency in allocating capital to profitable investments. It is calculated by dividing net operating profit after tax by invested capital. It gives a sense of how well a company is using its capital to generate profits. ASML's ROIC performance is closely correlated with that of ROE. It peaked at 41% at the end of 2022, then retraced in 2023, closing the third quarter of 2023 at 23%.

  • Net Profit Margin: Or simply net margin, measures how much net income or profit is generated as a percentage of revenue. It is calculated by the ratio of net profits to revenues for a company or business segment. Over the past 5 years, ASML’s Net Profit Margin has remained constant, hovering close to the value of 25%. It reached its lowest value in September 2019, touching 20.60%, while its peak of 31.60% was recorded in Q4 2021. In Q3 2023, its value stood at 28.50%, which represents a high margin.


Liquidity company refers to the ability of a company to convert its assets into cash quickly without significantly affecting their value. It is a crucial financial metric that assesses a company's short-term financial health and its ability to meet its immediate obligations. The most important liquidity ratios are:

  • Current ratio(0,92): A current ratio below 1 indicates that the company may have difficulty meeting its short-term obligations with its existing current assets. While a current ratio above 1 is generally considered healthier, a ratio slightly below 1, such as 0.92, doesn't necessarily mean immediate financial distress.

  • Quick ratio(1,27): A quick ratio of 1.27 suggests that the company has more than enough liquid assets (excluding inventory) to cover its short-term liabilities. Generally, a quick ratio above 1 is considered good, as it indicates that the company can meet its obligations without relying heavily on the sale of inventory.

  • Cash ratio(1,33): A cash ratio of 1.33 is generally considered healthy, as it suggests that the company has a comfortable buffer of liquid assets to meet its short-term obligations. A cash ratio above 1 indicates that the company has enough cash or near-cash assets to cover its immediate obligations without relying on the sale of inventory or the conversion of receivables

  • Short term coverage ratio(2,21): A short-term coverage ratio above 1 implies that the company has a comfortable buffer to meet its immediate debt obligations. In this case, a ratio of 2.21 suggests that the company is in a strong position to handle its short-term debt and has excess cash flow beyond what is required to cover its current obligations.


  • Debt to equity ratio (0,22): A debt-to-equity ratio of 0.22 indicates that the company's financial structure is such that a relatively small portion of its funding comes from debt compared to equity. A lower debt-to-equity ratio is generally considered less risky, as it suggests that the company relies more on equity financing, which does not have to be repaid in the same way that debt does.

  • Debt to capitalitation ratio (0,38): a ratio of 0.16 suggests that debt is a relatively small portion of the company's overall capitalization. Lower debt-to capital ratios are generally considered less risky, as they indicate a smaller reliance on debt financing, which typically involves regular interest payments and repayment obligations.

  • Interest coverage (0,008): An interest coverage ratio of 0.08, or 8%, indicates that the company is generating earnings equivalent to 8% of its interest expenses. In other words, the company's earnings are only sufficient to cover 8% of its interest obligations. A low interest coverage ratio could be an indicator of financial risk. If the ratio falls too low, it may imply that the company could have difficulty meeting its interest obligations, which might lead to financial distress.


Total assets turnover ratio(0,65): This ratio provides insights into how effectively a company is utilizing its assets to generate revenue.

A ratio of 0.65 may suggest that the company is not generating a particularly high level of sales relative to its total asset base. A lower ratio may indicate that the company's assets are not being used as efficiently as they could be in generating revenue.


  • EV/EBITDA(0,36): The EV/EBITDA ratio is a financial metric used to assess the valuation of a company by comparing its enterprise value (EV) to its earnings before interest, taxes, depreciation, and amortization (EBITDA). This ratio is commonly used by investors and analysts to evaluate the relative value of a company, especially in the context of mergers and acquisitions. Low Ratio (below 8x): Generally considered relatively undervalued. Investors might see it as an attractive investment opportunity. Moderate Ratio (8x to 12x): Considered average and may suggest a fair valuation. High Ratio ( above 12x): Could indicate a relatively higher valuation, and investors might scrutinize whether the company's future growth justifies the premium

  • EV/EBIT (0,30): If the EV/EBIT ratio is 0.30, it means that the company's enterprise value is 0.30 times its EBIT. This ratio is often used by investors and analysts to evaluate whether a company is relatively overvalued or undervalued in comparison to its earnings before interest and taxes. A lower EV/EBIT ratio may suggest that the company is relatively undervalued or has a lower valuation compared to its EBIT. A higher EV/EBIT ratio may indicate that the company is relatively overvalued or has a higher valuation compared to its EBIT

  • P/E(0,33): If a company has a P/E ratio of 0,33, it means that investors are willing to pay $0,33 for every dollar of earnings per share the company generates. This ratio provides insights into the market's valuation of a company's stocks. A higher P/E ratio may suggest that investors have high expectations for future earnings growth, or it could indicate that the stock is relatively overvalued. A lower P/E ratio may suggest that investors have lower expectations for future earnings growth, or it could indicate that the stock is relatively undervalued.


We used a discounted cash flow model in order to estimate the enterprise value of ASML so to obtain its equity value through a series of adjustments before computing its share price.


As mentioned above, the DCF model is framework used in financial modelling to obtain the intrinsic value of a company as the present value of all company’s cash flows it’ll generate in the future. This model is driven by Unlevered Free Cash Flow as this represents cash that is available for debt and equity holders and is calculated as EBIT minus taxes, plus D&A, minus CaPEx and change in Net Working Capital. This means that it’s enterprise value is calculated based on the performance of its operational activity. The cash flow estimation period is five years, from 2023 to 2027, where 2022 is the year of valuation. A longer horizon would lead to a less truthful due to the lack of data and future market uncertainties. It’s important to note that there’re two main distinct theories to calculate the enterprise value, both covered in this analysis. The two methods are the Exit EBITDA Multiple and the Perpetuity Growth Method.


The Exit Multiple Method serves to estimate a company's value by comparing it to similar businesses recently sold in the market. To employ this method, one selects a pertinent financial metric, such as EBITDA or revenue, reviews recent market transactions involving comparable companies, calculates the valuation multiple (in this case we used enterprise value-to-EBITDA ratio) from these transactions, and applies the resulting median or average multiple to the corresponding financial metric of the company in question. On the other hand, the Perpetuity Growth Method, also known as the Gordon Growth Model with perpetuity, is used to estimate the present value of cash flows into perpetuity, commonly applied to the terminal value in a discounted cash flow analysis. To execute this method, one estimates the company's future cash flows, determines a discount rate representing the required rate of return, calculates the terminal value by dividing the expected cash flow in the next period by the difference between the discount rate and a perpetual growth rate, and then discounts the terminal value before adding it to the present value of the company's cash flows over a defined projection period.

WACC (Weighted average cost of capital)

WACC stands for Weighted Average Cost of Capital, and it represents the average rate of return a company is expected to pay to its investors (both debt and equity holders) for using their capital to finance its operations. The WACC is calculated by taking the weighted average of the cost of equity and the cost of debt, considering the proportion of each in the company's capital structure. A WACC of 11.6% means that, on average, the company expects to incur a cost of 11.6% on its total capital, considering both equity and debt.

Sensitivity analysis

Sensitivity analysis in the context of a Discounted Cash Flow (DCF) valuation involves examining how changes in key assumptions or inputs affect the final valuation. The purpose is to understand the sensitivity of the valuation to variations in these variables. Here are some common sensitivity analysis parameters in a DCF: WACC, Tax rate, CapEx, Operating margins, Revenue growth rates, Terminal multiple and terminal growth rate.

Relative evaluation (Trading Comparable)

To make a comparison and have a general scenario we have selected companies by sector, origin, size, offer, and relationships with suppliers: TSM, INTC,QCOM, AVGO, INVIDIA, AMAT. We calculate us on the EV/EBITDA multiple, EV/REVENUE multiple, and P/E multiple using consensus earnings estimates to calculate a potential share price range for the year 2023.


The Piotroski score is an indicator of a company's financial strength based on a comparison of specific data from the company's financial statements. it is a score, ranging from zero to nine, that reflects nine financial criteria used to determine a company's financial strength. The Piotroski score is named after Stanford Business University accounting professor Joseph Piotroski, who devised the scale.For every criterion met, one point is awarded; otherwise, no points are awarded. The points are then added up to determine the best value stocks.

ASML totals a score of 7/9 by meeting the following criteria:

  • Positive net income (+1.89 bn)

  • ROA higher than previous year (20.90% vs 17.02%)

  • Positive operating cash flow (+1.1 bn)

  • Current ratio higher than previous year (1.33 vs 1.28)

  • Share dilution unchanged during the year

  • Gross margin higher than previous year (51.87% vs 51.49%)

  • Asset turnover ratio higher than previous year (0.73 vs 0.65)

The company loses only 2 points due to the absence of:

  • Lower long-term financial debt than in the previous year

  • Cash flow from operations lower than net income


Altman's Z-score is used in financial analysis to measure the deteriorating financial health of a company and its risk of bankruptcy. Altman's model is a linear function of variables representing certain balance sheet ratios selected by multiple linear discriminant analysis. By substituting the value of a company's ratios for the variables in the formula, a score (the Z-score) is obtained; the lower the score is below a given threshold, the greater the company's risk of bankruptcy.

The 5 indexes that make up the Z-score are as follows:

  • Working Capital/Total Assets

  • Retained earnings/Total Assets

  • Earnings before taxes and interest/Total assets

  • Capitalization/Total liabilities

  • Revenues/Total assets

At the end of 2023, ASML's Altman Score is 7.8, which places the company in the so called Safety Zone (which includes all companies with a score > of 3.00) and guarantees it strong financial stability, with an extremely moderate risk of bankruptcy.


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