ASML (NASDAQ:ASML) Identified as a Top Affordable Growth Stock

ASML HOLDING NV-NY REG SHS (NASDAQ:ASML) has been identified through an Affordable Growth screening strategy, which seeks companies demonstrating strong growth potential, sound profitability, and healthy financials, all while trading at reasonable valuations. This approach, often referred to as Growth at a Reasonable Price (GARP), aims to balance the pursuit of high-growth opportunities with a disciplined valuation framework to mitigate downside risk. The strategy avoids overpaying for growth, focusing instead on fundamentally sound companies that are positioned for sustainable expansion.

Growth Performance and Outlook ASML’s growth profile stands out as a key strength, with a ChartMill Growth Rating of 8 out of 10. Over the past year, the company achieved a remarkable 40.22% growth in earnings per share and a 26.41% increase in revenue, reflecting its dominant position in the semiconductor equipment sector. Historically, ASML has maintained an average annual EPS growth of 25.62% and revenue growth of 19.05% over recent years. Looking forward, analysts project continued solid growth, with expected annual EPS expansion of 17.02% and revenue growth of 10.64%. This strong historical and anticipated growth is central to the affordable growth thesis, as it indicates the company’s ability to compound value over time without relying on speculative projections.

Valuation Considerations With a ChartMill Valuation Rating of 5, ASML presents a reasonable valuation profile within its industry context. While its price-to-earnings ratio of 26.85 might appear elevated in absolute terms, it is actually positioned more favorably than 70% of its semiconductor industry peers. The forward P/E ratio of 25.10 similarly compares well against sector averages. More importantly, the PEG ratio, which adjusts the P/E for growth rates, suggests the current valuation is justified given the company’s earnings expansion trajectory. This balanced valuation is crucial for the affordable growth strategy, as it allows investors to participate in ASML’s growth story without paying excessive premiums typically associated with high-growth stocks.

Profitability and Financial Health ASML’s exceptional profitability, evidenced by a ChartMill Profitability Rating of 9, provides a strong foundation for its growth narrative. The company achieves impressive returns on invested capital of 30.33%, significantly outperforming industry averages, while maintaining strong operating margins of 34.90%. These metrics demonstrate efficient capital allocation and operational excellence, reducing the risk profile for growth investors. The company’s financial health rating of 7 reflects a solid balance sheet with manageable debt levels and strong solvency indicators, though current and quick ratios suggest some short-term liquidity considerations that are common in capital-intensive industries.

The combination of these factors, strong growth momentum, reasonable valuation relative to growth prospects, high profitability, and sound financial health, makes ASML a noteworthy candidate for investors seeking affordable growth opportunities. The company’s position as a critical supplier to the global semiconductor industry provides visibility for continued growth, while its financial metrics suggest this growth can be achieved without excessive risk.

For investors interested in exploring similar opportunities, additional affordable growth stocks can be found through our predefined screening methodology. A detailed fundamental analysis report for ASML is available here.

Disclaimer: This analysis is provided for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions.