ASML Could Significantly Outperform Over The Next 5 Years

What Makes a Compounder?

"Compounder" has become a buzzword in investment circles, but we define it simply: a company that delivers higher-than-average returns for longer-than-average periods.

The formula is basic economics - a compounder excels at both sides of the supply-demand equation:

Demand side: Growing revenue and profits drives investor interest
Supply side: Reducing share count increases each investor's ownership percentage

Why ASML Makes the Cut

ASML demonstrates classic compounder characteristics:

Growing Demand

- Revenue growth from 11B in 2018 to 32B today
- Net income increase from $2.6B to $9.3B in the same period
- Dominance in advanced chip manufacturing equipment, particularly EUV and DUV technology

Decreasing Supply
- Consistent share count reduction through buyback programs
- Management's clear focus on shareholder value

Why Now Is the Time to Buy

The current buying opportunity exists because:

- ASML is trading at the lower end of its historical P/E and P/S ranges
- The recent drawdown is among the deepest in years, comparable only to the 2022 tech slowdown
- The current pullback reflects cyclical semiconductor industry dynamics, not fundamental issues
- TTM revenue has already hit all-time highs, but the stock hasn't caught up

Risks to Consider

- Potential semiconductor manufacturer CAPEX delays affecting ASML's backlog
- Geopolitical risk with Taiwan, where many customers including TSMC are located
- Premium valuation relative to broader market