ASML Holding (NasdaqGS:ASML) is back in focus after its share price moved recently, with a 1 day return of 1% and a 3 month total return of 36.8% drawing investor attention.

The latest move comes after a strong run, with the share price at $1,389.16 and short term momentum cooling slightly while longer term total shareholder returns, particularly over 1 and 5 years, remain robust.

If ASML's performance has you thinking about what else is driving semiconductor-related themes, this is a good moment to scan 34 AI infrastructure stocks

With ASML at $1,389.16 after a strong multi year run and with recent returns cooling, is the current price still leaving meaningful upside on the table, or is the market already assuming years of future growth?

Price to earnings of 47.9x: Is it justified?

ASML is currently trading on a P/E of 47.9x, which sits below its peer group average of 52.1x but above the broader US semiconductor industry on 43.6x.

The P/E ratio compares the current share price with earnings per share, so a higher multiple usually reflects higher expectations for future profitability. For a company supplying core lithography equipment into the semiconductor sector, earnings quality, growth and return on equity are key inputs that often shape where that multiple settles.

ASML has high quality earnings, very strong recent earnings growth of 26.9% that is ahead of its 15.3% per year over 5 years, and a 49% return on equity. At the same time, the current P/E of 47.9x sits above the estimated fair P/E of 40.3x, which points to a level the market could move towards if expectations ease.

Against the broader US semiconductor industry average of 43.6x, ASML's 47.9x P/E suggests investors are paying a premium relative to the sector, even if it is still below the 52.1x peer group average.

Result: Price-to-earnings of 47.9x (OVERVALUED)

However, there are clear pressure points, including a P/E above the estimated fair level and heavy revenue exposure to regions like China and South Korea, which could face regulatory or demand shocks.

Another view using future cash flows

While the 47.9x P/E points to an overvalued share price relative to the fair ratio, the SWS DCF model presents an even clearer contrast. At $1,389.16, ASML trades well above the model's future cash flow value of $767.42, suggesting limited room for error if growth or returns soften. So which signal carries more weight for you right now?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out ASML Holding for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If this mix of signals feels finely balanced, take it as a prompt to act promptly, review the full picture for yourself, and weigh up the 2 key rewards

Looking for more investment ideas?

If ASML is already on your radar, do not stop there. Broaden your watchlist now so you are not relying on a single story.

• Spot potential mispricings early and scan 49 high quality undervalued stocks that combine quality fundamentals with prices that may not fully reflect their strengths.
• Prioritise resilience in tougher markets by checking 76 resilient stocks with low risk scores that score well on stability, financial health, and lower overall risk.
• Get ahead of the crowd by reviewing a screener containing 27 high quality undiscovered gems before they appear on everyone else's radar.

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.