Is ASML Still Attractive After a 144.9% Five Year Surge and Premium Valuation?

• If you have been wondering whether ASML Holding at around $1,111 a share is still worth buying after its huge run, you are not alone. That is exactly what we are going to unpack here.
• The stock is down about 2.6% over the last week, but it is still up 7.0% over the past month and 58.7% year to date, with a 56.8% gain over 1 year, 84.7% over 3 years, and 144.9% over 5 years.
• Those gains have followed long term enthusiasm around ASML’s position in advanced lithography equipment and its role in the global semiconductor build out. At the same time, investors are weighing ongoing geopolitical tensions around chip export controls and supply chain resilience, which can quickly shift sentiment even for a business like this.
• Despite that optimism, ASML currently scores just 1 out of 6 on our undervaluation checks. In the sections that follow, we will walk through different valuation approaches to see what the market might be pricing in today and then circle back at the end to a more nuanced way to think about what the stock may be worth.

ASML Holding scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: ASML Holding Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company might be worth by projecting future cash flows and then discounting them back to today’s value. For ASML, the model uses a 2 stage Free Cash Flow to Equity approach based on its current free cash flow and long term growth assumptions.

ASML generated roughly €8.6 billion of free cash flow over the last twelve months, and analysts expect this to rise steadily as demand for advanced lithography tools grows. By 2029, free cash flow is projected to reach about €17.3 billion, with further years extrapolated by Simply Wall St to capture a full decade of potential cash generation.

When all these projected cash flows are discounted back, the model arrives at an intrinsic value of about $770 per share. Compared with the recent share price around $1,111, this implies ASML is roughly 44.4% above the DCF estimate. This suggests the market is already pricing in a very optimistic long term outlook.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests ASML Holding may be overvalued by 44.4%. Discover 893 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for ASML Holding.

Approach 2: ASML Holding Price vs Earnings

For profitable, mature businesses like ASML, the Price to Earnings (PE) ratio is a useful way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, companies with stronger and more predictable growth, and lower perceived risk, can justify a higher than average PE, while slower growing or riskier firms tend to trade on lower multiples.

ASML currently trades on a PE of about 39.0x, which is slightly above the broader Semiconductor industry average of around 37.9x, but below the peer group average of roughly 43.7x. To get a more tailored view, Simply Wall St also calculates a proprietary “Fair Ratio” of 31.1x, which is the PE that might be expected for ASML given its specific earnings growth profile, profitability, industry, market cap and key risks.

This Fair Ratio approach is more insightful than a simple comparison with peers or the industry because it explicitly adjusts for ASML’s growth outlook, margins and risk factors rather than assuming all chip stocks deserve similar multiples. Comparing the Fair Ratio of 31.1x with the current 39.0x suggests the shares are trading at a premium to what would typically be justified by its fundamentals.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1451 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your ASML Holding Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of ASML’s story with the numbers behind it.

A Narrative is your own explanation of what you think will happen to a company, translated into assumptions about future revenue growth, profit margins and risks, which then flow through to a forecast and a fair value estimate.

On Simply Wall St’s Community page, used by millions of investors, you can easily create or explore Narratives for ASML that tie together its technological moat, industry position and macro risks with a dynamic valuation that automatically updates as new news or earnings are released.

By comparing each Narrative’s Fair Value with today’s share price, investors can quickly see whether their story suggests ASML is a buy, hold or sell. They can also see how others differ, for example with one Narrative valuing ASML at about $1,002 per share and another at a meaningfully lower level based on more cautious growth assumptions.

Do you think there's more to the story for ASML Holding? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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