AMAT  Applied Materials Inc.

Exchange

NASDAQ

Sector

Technology

Industry

Semiconductors

Market Cap.

60.35B

Vuru Grade

62.88/100

Current Price

$56.59
+0.155 (+0.275%)

Growth Price

$33.32
Overvalued by 41.11%

Stability Price

$12.42
Overvalued by 78.05%

Company Metrics

  • P/E 20.116
  • P/S 4.341
  • P/B 6.904
  • EPS 2.813
  • Cash ROIC 22.61%
  • Cash Ratio 1.77
  • Dividend 0.4 / 0.71%
  • Avg. Vol. 10.25M
  • Shares 1.07B
  • Market Cap. 60.35B

Company Description

Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. Its Silicon Systems Group segment offers a range of manufacturing equipment used to fabricate semiconductor chips or integrated circuits. It provides systems that perform primary processes used in chip fabrication, inc... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

There is no news available at this time.
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for AMAT to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate AMAT's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$56.59 Current Price

$33.32 Growth Price (DCF)

Overvalued by 41.11%


Growth Rate Assumed by Market: 21.74%


Future Free Cash Flow Growth Rate: 5.6%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$12.42 Stability Price (EPV)

Overvalued by 78.05%


Discount Rate: 15.0%

$2.67 NCA Price

Overvalued by 95.28%

$24.03 Book Price

Overvalued by 57.53%


Excellent Cash Return on Invested Capital over the past 5 years

AMAT has efficiently invested its financial resources in buildings, projects, and equipment, resulting in strong returns. Annual Reports can be useful in identifying the cause of one-time events and future sustainability.

AMAT has created $22.61 of cash for every $100 invested.
Figures in USD. Fiscal year ends in October
20132014201520162017
Free Cash Flow 426.00M 1.56B 948.00M 2.21B 3.26B
divided by
Invested Capital 7.71B 7.19B 6.55B 7.21B 8.03B
Cash ROIC 5.53% 21.69% 14.48% 30.71% 40.66%

Excellent Return on Equity over the past 5 years

Over the past 5 years, AMAT has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

AMAT has generated $19.18 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in October
20132014201520162017
Net Income 256.00M 1.07B 1.38B 1.72B 3.43B
divided by
Stockholders' Equity 7.09B 7.87B 7.61B 7.22B 9.35B
Return on Equity 3.61% 13.62% 18.09% 23.85% 36.73%

Excellent Business Performance over the past 10 years

AMAT has been able to maintain profitability in good times and bad. This could mean AMAT has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

AMAT has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Free Cash Flow 1.42B 84.24M 1.55B 2.22B 1.69B 426.00M 1.56B 948.00M 2.21B 3.26B

Weak Balance Sheet

AMAT's financial position is not ideal. The key is to check whether AMAT is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Cash 2.10B 2.21B 2.58B 6.24B 1.94B 1.89B 3.16B 4.97B 3.75B 7.28B
Current Assets 6.66B 5.69B 6.77B 10.36B 5.10B 5.64B 6.97B 9.26B 8.35B 12.92B
Total Assets 10.91B 9.57B 10.94B 13.86B 12.10B 12.04B 13.17B 15.31B 14.59B 19.42B
Current Liabilities 2.95B 1.94B 2.89B 2.79B 2.27B 2.44B 2.82B 3.80B 3.63B 4.12B
Total Liabilities 3.46B 2.48B 3.41B 5.06B 4.87B 4.96B 5.31B 7.70B 7.37B 10.07B
Stockholder' Equity 7.45B 7.09B 7.54B 8.80B 7.24B 7.09B 7.87B 7.61B 7.22B 9.35B
Current Ratio 2.26 2.93 2.34 3.71 2.25 2.31 2.47 2.44 2.30 3.14
TL-to-TA 0.32 0.26 0.31 0.37 0.40 0.41 0.40 0.50 0.51 0.52

Consistent Reinvestment of Profits over the past 10 years

AMAT has consistently retained profits. This may put AMAT in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, AMAT can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Retained Earnings 11.50B 10.93B 11.51B 13.03B 12.70B 12.49B 13.07B 13.97B 15.25B 18.26B
Retained Earnings Growth - -4.93% 5.28% 13.19% -2.53% -1.68% 4.68% 6.85% 9.20% 19.71%

Inconsistent Net Profit Margins over the past 10 years

AMAT potentially has a competitive advantage, however inconsistent profit margins are a cause for concern. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$10.41 of every $100 of Revenue have been pure profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Net Income 960.75M -305.33M 937.87M 1.93B 109.00M 256.00M 1.07B 1.38B 1.72B 3.43B
divided by
Revenue 8.13B 5.01B 9.55B 10.52B 8.72B 7.51B 9.07B 9.66B 10.83B 14.54B
Net Profit Margin 11.82% -6.09% 9.82% 18.31% 1.25% 3.41% 11.82% 14.26% 15.90% 23.62%

Satisfactory Pricing Power over the past 10 years

Consistency is vital. AMAT has been able to maintain gross margins fairly consistently, which is a strong indication of their ability to raise prices with inflation. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$39.90 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Gross Profit 3.44B 1.43B 3.72B 4.36B 3.31B 2.99B 3.84B 3.95B 4.51B 6.53B
divided by
Revenue 8.13B 5.01B 9.55B 10.52B 8.72B 7.51B 9.07B 9.66B 10.83B 14.54B
Gross Margin 42.35% 28.54% 38.91% 41.46% 38.00% 39.83% 42.36% 40.92% 41.67% 44.93%

Medium Capital Intensity over the past 10 years

AMAT has used a reasonable amount of their financial resources to invest in facilities and equipment required to produce its goods and services. This isn't perfect, but it shouldn't be an area of concern unless this number is strongly trending upwards.

38.59% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Capital Expenditure 287.91M 248.43M 169.08M 209.00M 162.00M 197.00M 241.00M 215.00M 253.00M 345.00M
divided by
Net Income 960.75M -305.33M 937.87M 1.93B 109.00M 256.00M 1.07B 1.38B 1.72B 3.43B
Capital Expenditure Ratio 29.97% -81.36% 18.03% 10.85% 148.62% 76.95% 22.48% 15.61% 14.70% 10.05%

Very Strong Dividend History over the past 10 years

AMAT has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests AMAT is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Dividend Paid 325.41M 319.51M 348.52M 397.00M 434.00M 456.00M 485.00M 487.00M 444.00M 430.00M
divided by
Shares Outstanding 1.37B 1.33B 1.35B 1.33B 1.28B 1.22B 1.23B 1.23B 1.12B 1.08B
Dividend Paid Per Share 0.24 0.24 0.26 0.30 0.34 0.37 0.39 0.40 0.40 0.40
Price at Year End 9.43 13.33 13.70 10.64 11.26 17.49 25.36 18.96 32.27 43.44
Dividend Yield 2.51% 1.80% 1.89% 2.81% 3.02% 2.14% 1.55% 2.10% 1.23% 0.91%

Strong History of Stock Buybacks over the past 10 years

AMAT has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in October
2008200920102011201220132014201520162017
Shares Outstanding 1.37B 1.33B 1.35B 1.33B 1.28B 1.22B 1.23B 1.23B 1.12B 1.08B
Stock Bought Back - 3.11% -1.16% 1.41% 4.15% 4.76% -0.97% 0.41% 9.86% 2.95%
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Discussion
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1
Posted by LearningToFish  (on April 22, 2012)
Just wondering how the 4.82B of Invested Capital for 2011 was figured (?) I come up with Total Assets 13.86B - Excess Cash 4.10B - NIBCLS of Accounts Payable .484 & Accrued Liabilities .486 = 8.79.

I'm assured that I'm doing something wrong, but I'm not sure what - please advise! Thanks!
1
Posted by VuruSupport  (on April 25, 2012)
Hi LearningToFish,

Here's our formula for calculating Invested Capital:

Invested Capital = Stockholders Equity + Total Liabilities - Current Liabilities - Excess Cash

Excess Cash = Total Cash - (Current Liabilities - Total Assets)

For the Excess Cash formula, the section in brackets will only be subtracted if it's greater than 0

I hope that helps. Please don't hesitate to reach out over email (support at vuru dot co) if you have any other questions.

Victoria