MKS INC (MKSI): what the price assumes

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/MKSI

Headline

Field	Value
Ticker	MKSI
Company	MKS INC
Current price	$259.46/sh
Composition	Semiconductor 43% / Electronics and Packaging 28% / Specialty Industrial 29%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin (value-band context)	19.4%
Operating margin today	13.9%
Margin expansion (value-band)	+5.5pp
Must persist for	14.5y
Multiple paid	38x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 12.5% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.3 years.

Reconcile: at the x-ray's 9.3% required return this reads ~7.8 years; the models below use their own rates.

How unusual the bet is: elevated

Reference	Value
vs own history	+0.36σ
sustained it ~10 years at this level	14%
implied end-window share	0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	4.40x	4	expensive
Earnings	3.35x	2	expensive
Relative	1.68x	5	expensive
Growth	1.27x	3	expensive

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=14)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$137.59	1.89x	yes	FCF base $0.4B, growth 11% (input: historical growth), terminal g 4.0%, WACC 7.7%, 6yr projection
DCF Exit Multiple	Growth	$251.55	1.03x	yes	Exit EV/EBITDA: 21.2x / 23.2x / 25.2x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	$154.23	1.68x	yes	P/E 28.68x (blended: static sector reference 18x + trailing (TTM) 54x), scenarios: 23.7x / 28.7x / 33.7x (bear / base = reference held flat / bull), EV/EBITDA 15.36x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$52.34	4.96x	yes	BV/sh $41.62, ROE (TTM) 11.6%, ke 9.3%
Two-Stage Excess Return	Asset	$58.40	4.44x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$204.61	1.27x	yes	Rev $4.1B, growth 11% (input: historical growth; tapered), Terminal P/S: 3.6x / 4.3x / 5.1x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$167.30	1.55x	yes	EPS $4.78, growth 35% (input: historical EPS growth), PEG=1.53 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$0.01	25946.00x	yes	Normalized EBIT (5y avg op income, one-time charges added back) $0.17B × (1−18%) / WACC 7.7% → EPV (no growth) (excluded from median)
Residual Income	Asset	$59.61	4.35x	yes	BV $41.62 + 5yr PV of (ROE (TTM) 11.6% − Kₑ 9.3%) × BV; BV grows 7.6%/yr
Graham Number	Asset	$66.90	3.88x	yes	√(22.5 × EPS $4.78 × BVPS $41.62) — Graham's conservative floor
EV/EBITDA Relative	Relative	$108.60	2.39x	yes	EBITDA $0.91B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	$11.27	23.02x	yes	FCF $402.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF Yield	Earnings	$2.94	88.25x	yes	SBC-adj FCF $0.35B (FCF $0.40B − SBC $0.05B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	$154.23	1.68x	yes	EPS $4.78 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	$10.39	24.97x	yes	BV $41.62 × (ROIC 1.9% / WACC 7.7%) (excluded from median)
P/Sales Sector	Relative	$150.75	1.72x	yes	Revenue $4.07B × sector P/S 2.5x
PEG Fair Value	Relative	$179.25	1.45x	yes	EPS $4.78 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings Yield	Earnings	$51.68	5.02x	yes	EPS $4.78 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$3.6b
Net debt / NOPAT (after-tax)	7.69x
Net debt / operating income (pre-tax)	6.33x
Interest coverage	2.8x
Share count CAGR (dilution)	6.2%
Burning cash	no

Bullet Takeaways

• MKS supplies the critical subsystems, plasma, vacuum, RF power, photonics, and process chemistry, that semiconductor and electronics manufacturers build into their tools, and the semiconductor segment alone generated $466 million in the first quarter, up 13% year over year on broad strength across DRAM, NAND, and foundry/logic.
• The earnings trajectory is the bull's case: first-quarter non-GAAP EPS of $2.30 beat by about 13%, and management guided second-quarter revenue to roughly $1.2 billion, about 11% sequential growth, signaling an accelerating up-cycle.
• The biggest risk is that the price assumes the cycle never ends: at roughly sixty times operating income the stock is rich on every standard lens, while the share count is rising and the business serves industries the 10-K calls subject to "periodic fluctuations in business activity that may cause a reduction in demand."

Bull Case

The momentum is the story, and the direction is unambiguous. First-quarter revenue reached $1,078 million, non-GAAP EPS of $2.30 beat the $2.04 consensus by about 13%, and management guided the second quarter to roughly $1.2 billion of revenue with non-GAAP EPS of $2.90, an 11% sequential step up. Revenue, margins, and earnings are all moving the same way at the same time, which is what an early-cycle semiconductor-equipment recovery looks like from the inside. When a supplier guides up double digits sequentially, it is reading order books that point higher.

The semiconductor segment is where the leverage to the AI capital-spending wave lives. It generated $466 million in the quarter, 43% of revenue, up 13% year over year and 7% sequentially, with broad-based strength across DRAM, NAND, and foundry and logic. MKS sits at a useful chokepoint: its plasma, vacuum, RF-power, and photonics subsystems go into the deposition and etch tools that build advanced chips, so its content rises as chipmakers add capacity and as each new node demands more precise process control. The company backs this with sustained development through its global technology centers, working to "anticipate future industry requirements" as customer needs evolve. That is the position of a picks-and-shovels supplier in a building boom.

The balance sheet is moving in the right direction too. The company refinanced a large slice of its acquisition debt, cutting long-term debt to about $2.65 billion from $4.15 billion through new 2034 euro notes and a term-loan prepayment, and quarterly interest expense fell. Lower interest cost flows straight to earnings and frees cash for the business. The bull case is straightforward: MKS is a critical-subsystem supplier riding an AI-driven semiconductor up-cycle, with accelerating revenue, expanding earnings, a chemistry business that broadens the addressable market beyond pure semiconductors, and a balance sheet that just got materially cheaper to carry.

Bear Case

The price depends on a story that runs far longer than any semiconductor cycle has. At $406.02 (June 27, 2026) the stock trades around sixty times trailing operating income, and to grow into that the business would have to lift its operating margin from about 14% today toward the mid-thirties and hold a near-ceiling growth rate for the better part of two decades. The most fragile assumption is not the growth rate, which MKS is delivering right now; it is the duration. The price is underwriting roughly twenty-two years of compounding, and history says only about 14% of fast-growers sustain such a pace even ten years. For a company whose end markets are defined by cyclicality, asking for two decades of uninterrupted ascent is asking the cycle to disappear.

It will not. The 10-K is explicit that the "semiconductor, electronics manufacturing and automotive industries we serve are characterized by periodic fluctuations in business activity that may cause a reduction in demand," and it adds the supply-chain mirror image: misjudging demand has "resulted in excess or obsolete inventory" and dependence on "sole and limited source suppliers" adds fragility. Semiconductor equipment is a notoriously whipsawing business; the same operating leverage that is lifting earnings now reverses hard in a downturn, and the price as it stands has priced in the up-leg as if it were permanent.

Leverage amplifies the cyclical risk even after the refinancing. The company still carries roughly $2.65 billion of long-term debt against the chemistry-acquisition that built it, interest coverage is only in the low single digits, and the share count has been rising rather than falling, so per-share earnings have to outrun dilution. A levered, cyclical company priced for two decades of perfection has two ways to disappoint: a normal industry downcycle that compresses the earnings the multiple is built on, or a stumble in the chemistry integration that the debt was raised to finance. Every standard valuation lens, asset value, earnings power, peer multiples, and even the forward-growth method, reads the stock as expensive. When no frame can justify the price, the bear does not need a catastrophe. It needs only the cycle to behave the way the cycle always has.

Valuation

The bet embedded in the price is unusually demanding. At about sixty times trailing operating income, $406.02 implies MKS holds a near-ceiling growth rate for roughly twenty-two years, and separately implies the business lifts its operating margin from about 14% today toward the mid-thirties. The growth rate itself is within what MKS is producing in this up-cycle. The stretch is in how long it has to persist and how far the margin has to climb, both of which the price treats as settled rather than uncertain.

What makes the valuation stand out is that no family of method reaches the price. The asset-value lenses, anchored on a book value near $40 per share and a return on equity around 12%, land far below. The earnings-power and peer-multiple lenses also say expensive. Even the forward-growth method, which credits an 11% growth rate carried forward, only reaches the price on its most generous exit-multiple variant. When the optimistic frame and the conservative frames all agree the stock is rich, the price is a bet beyond what any standard valuation supports. That is not a verdict that MKS is a bad business; it is the opposite, a fine business whose price has run ahead of every way of measuring it.

Solvency is the constraint that keeps the bet from being a free option on the up-cycle. The recent refinancing helped, cutting long-term debt to roughly $2.65 billion and lowering interest expense, but coverage remains in the low single digits, which is thin for a company whose revenue can fall sharply in a downturn. The dividend is small, and the share count is rising rather than falling, so the company is not returning capital the way a mature compounder does. The decisive question for the valuation is the one the price has already answered in the affirmative: whether this semiconductor up-cycle is the beginning of a structural, AI-driven expansion that runs for many years, or a strong cyclical peak that the market has mistaken for a permanent plateau. At sixty times operating income, the margin for that question to resolve the wrong way is small.

Catalysts

MKS reported first-quarter 2026 results that beat and guided higher. Revenue of $1,078 million produced GAAP net income of $84 million, or $1.18 per diluted share, and non-GAAP EPS of $2.30 that topped the $2.04 consensus by roughly 13%. The semiconductor segment, the largest at 43% of revenue, generated $466 million, up 13% year over year and 7% sequentially on broad strength across DRAM, NAND, and foundry and logic. Management guided second-quarter revenue to about $1.2 billion, plus or minus $40 million, with non-GAAP EPS of $2.90 and adjusted EBITDA near $328 million, an accelerating step up.

The other notable event was the balance-sheet move. The company refinanced a large portion of its debt, issuing one billion euros of 4.250% senior notes due 2034 and prepaying about $1.27 billion of its term loan, which cut long-term debt to roughly $2.65 billion from $4.15 billion and lowered quarterly interest expense to $45 million from $53 million. The forward catalysts are the trajectory of AI-driven semiconductor capital spending, which drives the largest segment, the pace of the chemistry business that came with the prior acquisition, and any further debt reduction that lowers the interest burden. The risk to watch on the other side is the timing of the next industry downcycle, given how much of the current price rests on the up-cycle continuing.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• VLTO (VERALTO CORPORATION)
• FY2025 10-K: …margin comparisons: 2025 vs. 2024 operating profit margin comparisons were favorably impacted by: • Higher 2025 core sales driven by positive pricing actions and materials cost saving initiatives, partially offset by incremental labor and raw materials costs and the impact of product mix - 100 basis points 2025 vs.…
• FY2025 10-K: …by 1.0% and 0.2%, respectively, during 2025 as compared to 2024. Geographically, the increase in reported sales was driven by an increase of 9.5% in Western Europe, 5.5% in high-growth markets, and 5.0% in North America. Price increases in the segment contributed 1.5% to sales growth on a year-over-year basis during…
• AME (AMETEK, Inc.)
• FY2025 10-K: …impacted 60 basis points by the dilutive impact of recent acquisitions and 30 basis points from acquisition-related integration costs. Segment operating income and operating margins in 2024 included $29.2 million of acquisition-related integration costs related to the Paragon acquisition, which negatively impacted…
• FY2025 10-K: …Denmark, Finland, France, Switzerland, Argentina, Austria, Serbia, and Mexico. EIG also shares operating facilities with EMG in China, Serbia, and Mexico. Process and Analytical Instrumentation Markets and Products Process and analytical instrumentation sales represented 70% of EIG's 2025 net sales. These businesses…
• ITRI (Itron, Inc.)
• FY2025 10-K: …to the CODM. We do not manage the performance of the segments on a balance sheet basis. Other income (expense) primarily includes interest income, interest expense, and amortization of prepaid debt fees. The CODM assesses the segments' performance primarily by using each segment's adjusted operating income,…
• FY2025 10-K: …innovative new technology for critical infrastructure in electricity, natural gas, water, heat, smart city, and DERMs verticals. This includes endpoints, sensing and control devices, data collection software, communication technologies, data warehousing, software applications, and the IIoT. We invested approximately…
• ST (SENSATA TECHNOLOGIES HOLDING PLC)
• FY2025 10-K: …vehicles Competitors Within each of the principal product categories in Aerospace, Defense, and Commercial Equipment, we compete with large corporations and small companies, depending on the end market. We believe that the key competitive factors in these markets are product performance, quality, reliability, and…
• FY2025 10-K: …support changes to our business strategy. These changes resulted in the dissolution of our prior segments, Performance Sensing and Sensing Solutions, and the creation of three new segments. Our Automotive segment includes our Automotive and Aftermarket businesses. The Industrials segment includes our Industrial and…
• VNT (Vontier Corporation)
• FY2025 10-K: …expense not indicative of the segment's core operating performance. As part of the CODM's assessment of the Repair Solutions segment, a capital charge calculated based on the segment's average gross outstanding financing receivables portfolio during the period and an estimated weighted average cost of capital is…
• FY2025 10-K: …segment operating profit margin decreased 130 basis points during the same period. The decrease in segment operating profit margin was due to a decrease in volume, as further discussed above. Environmental & Fueling Solutions Segment operating profit for our Environmental & Fueling Solutions segment increased $27.1…
• DHR (Danaher Corporation)
• FY2025 10-K: …customers and in the academic and government end-markets reduced demand for the segment's products during the period. Geographically, the core sales decline was led by North America. 41 Table of Contents The year-over-year decrease in segment core sales was led by the life science consumables business, primarily in…
• FY2025 10-K: …and Western Europe. 40 Table of Contents The year-over-year core sales increase in the segment was led by high-single digit increases in core sales in the bioprocessing business and was primarily driven by improved consumables demand from large pharmaceutical and CDMO customers, partially offset by lower…
• A (AGILENT TECHNOLOGIES, INC.)
• FY2025 10-K: …and polyfluoroalkyl substances ("PFAS") into the environmental market. 50 Table of Contents Looking Forward. While the recent tariff changes adversely impacted our costs of revenue for the second half of fiscal year 2025, we expect to substantially mitigate the impact during our fiscal year 2026. Therefore, we remain…
• FY2025 10-K: …expenses attributed to business exit activities, lower variable pay and lower salary expense related to workforce reduction activities partially offset by higher infrastructure costs. Operating margin was relatively flat in 2025 when compared to 2024. Operating margin was flat due to lower salary expense related to…
• BMI (BADGER METER, INC.)
• FY2025 10-K: …41.7% in 2025. The gross margin improvement was due to favorable product mix, driven by sales growth in ultrasonic meters, ORION Cellular radios, water quality products and SmartCover. Selling, engineering and administration (SEA) expenses were $198.6 million or 21.7% of sales in 2025 compared to $171.2 million or…
• FY2025 10-K: …to identify, attract, develop and retain skilled personnel throughout our organization. Current and future compensation arrangements, including benefits, may not be sufficient to attract new employees or retain existing employees, which may hinder our growth. Increased labor competition from accelerated retirements,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

MKS Q1 2026 results, 2026 · MKS FY2025 10-K