-
While other companies grab the headlines, ASML is one of the most important players in the entire industry.
-
The company’s financial metrics are trending in the right direction, and investors should benefit over the long term.
-
10 stocks we like better than ASML ›
Some may think it’s a stretch to say it’s worth more than $500 billion. ASML (NASDAQ: ASML) An overlooked artificial intelligence (AI) stock. But it’s not a household name. In contrast, investors immediately think of companies that: Nvidiaequipped with AI hardware, alphabetusing AI software. Still, without ASML, AI can accomplish little.
ASML manufactures lithography machines that use extreme ultraviolet light to etch designs onto silicon wafers. This is the process by which most things in the semiconductor industry are manufactured, and ASML is essentially the only shop in town.
Due to the boom in artificial intelligence, ASML’s revenue has seen tremendous growth in recent years. Granted, the machines it sells cost hundreds of millions of dollars each, so growth can come in waves. This means that selling even a few more or a few less can have a big impact on your financial results. However, the overall trend is upward.
There are advantages to having market power. ASML boasts strong financial metrics, including an operating margin of nearly 35%. In short, this business is incredibly profitable. This results in incredibly good numbers on metrics such as return on equity (53%) and return on invested capital (43%).
Additionally, ASML’s management has leveraged its strong performance to build a very strong balance sheet. The company is based in the Netherlands, so figures are reported in euros. As of the third quarter of 2025, the company had cash and cash equivalents of 5.1 billion euros, while long-term debt was only 2.7 billion euros.
Investors are often encouraged to buy high-quality companies. In case you’re wondering, ASML fits that description. The company has a defensible position in a high-growth industry and has driven revenue growth, high profit margins, and a strong balance sheet. In other words, ASML is a high-quality business.
The only issue with ASML stock right now is its valuation. The company’s P/E ratio is over 50x, which is expensive unless it can achieve significant long-term earnings growth.
Indeed, ASML is a long-term formulation tool. Therefore, I believe that it can be achieved at least some Revenue growth. The return on invested capital mentioned above shows that when a business owner invests money to grow a business, it pays off. And now management is investing to nearly double revenue by 2030.
