What happened

Shares of lithography-solutions company ASML Holding N.V. (ASML -2.05%) rose 11.6% in June, according to data provided by S&P Global Market Intelligence. Not much happened with the company during the month. However, the semiconductor industry is showing signs of entering a bull cycle, which bodes well for this manufacturer of semiconductor fabrication equipment.

June's gains continue a longer trend for ASML Holding. Losses in March now look like a mere blip, with the stock up 84% over the past year and trouncing the S&P 500.

ASML Chart

ASML data by YCharts

So what

There are multiple reasons to believe the cyclical semiconductor industry is trending higher. For example, memory company Micron Technology recently reported both volume and average selling price are increasing for semiconductor memory products. It makes sense. Many factors, including enterprise cloud migration and work-from-home trends, are pushing the need for more semiconductor products.

As semiconductor demand increases, so must supply. And ASML Holding already provides equipment to all the major chipmakers. So long as the industry rises, the company is almost guaranteed to be a beneficiary.

Stacks of blocks increase in size, each topped with a block featuring the image of an upward arrow.

Image source: Getty Images.

Now what

While ASML Holding appears to be on solid financial ground and its business outlook is unchanged, I wonder if the stock isn't getting significantly ahead of results. It trades at roughly 12 times trailing sales, and 55 times trailing earnings. Its dividend yield is modest under 1%, and share buybacks are currently paused because of uncertainty from COVID-19.

That last point is reason for concern. The possibility still remains that the coronavirus will disrupt the semiconductor cycle as economies contract. If it continues to drag on, it could reduce semiconductor demand. It's true that ASML Holding is a strong player in the space, but in my opinion the stock doesn't currently reflect any risk.