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GuruFocus has detected 5 Warning Signs with Applied Materials Inc $AMAT.
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Applied Materials Inc (NAS:AMAT)
Piotroski F-Score
7 (As of Today)

Good Sign:

Piotroski F-Score of 7 is 7, indicating very healthy situation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Applied Materials Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

AMAT' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 8
Current: 7

3
8

During the past 13 years, the highest Piotroski F-Score of Applied Materials Inc was 8. The lowest was 3. And the median was 6.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Net Income was 286 + 320 + 505 + 610 = $1,721 Mil.
Cash Flow from Operations was 207 + 481 + 981 + 797 = $2,466 Mil.
Revenue was 2257 + 2450 + 2821 + 3297 = $10,825 Mil.
Gross Profit was 916 + 1004 + 1192 + 1399 = $4,511 Mil.
Average Total Assets from the begining of this year (Oct15)
to the end of this year (Oct16) was
(15308 + 13326 + 13075 + 13699 + 14588) / 5 = $13999.2 Mil.
Total Assets at the begining of this year (Oct15) was $15,308 Mil.
Long-Term Debt was $3,143 Mil.
Total Current Assets was $8,353 Mil.
Total Current Liabilities was $3,632 Mil.
Net Income was 348 + 364 + 329 + 336 = $1,377 Mil.

Revenue was 2359 + 2442 + 2490 + 2368 = $9,659 Mil.
Gross Profit was 959 + 1016 + 1018 + 959 = $3,952 Mil.
Average Total Assets from the begining of last year (Oct14)
to the end of last year (Oct15) was
(13174 + 13073 + 13587 + 13153 + 15308) / 5 = $13659 Mil.
Total Assets at the begining of last year (Oct14) was $13,174 Mil.
Long-Term Debt was $3,342 Mil.
Total Current Assets was $9,261 Mil.
Total Current Liabilities was $3,798 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Applied Materials Inc's current net income (TTM) was 1,721. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Applied Materials Inc's current cash flow from operations (TTM) was 2,466. ==> Positive ==> Score 1.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

Applied Materials Inc's return on assets of this year was 0.11242488. Applied Materials Inc's return on assets of last year was 0.10452406. ==> This year is higher. ==> Score 1.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Applied Materials Inc's current net income (TTM) was 1,721. Applied Materials Inc's current cash flow from operations (TTM) was 2,466. ==> 2,466 > 1,721 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Oct16)=Long-Term Debt/Average Total Assets from Oct15 to Oct16
=3143/13999.2
=0.22451283

Gearing (Last Year: Oct15)=Long-Term Debt/Average Total Assets from Oct14 to Oct15
=3342/13659
=0.24467384

Applied Materials Inc's gearing of this year was 0.22451283. Applied Materials Inc's gearing of last year was 0.24467384. ==> This year is lower or equal to last year. ==> Score 1.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Oct16)=Total Current Assets/Total Current Liabilities
=8353/3632
=2.2998348

Current Ratio (Last Year: Oct15)=Total Current Assets/Total Current Liabilities
=9261/3798
=2.43838863

Applied Materials Inc's current ratio of this year was 2.2998348. Applied Materials Inc's current ratio of last year was 2.43838863. ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Applied Materials Inc's number of shares in issue this year was 1116. Applied Materials Inc's number of shares in issue last year was 1226. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=4511/10825
=0.41672055

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=3952/9659
=0.40915209

Applied Materials Inc's gross margin of this year was 0.41672055. Applied Materials Inc's gross margin of last year was 0.40915209. ==> This year's gross margin is higher. ==> Score 1.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Oct15)
=10825/15308
=0.70714659

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=9659/13174
=0.73318658

Applied Materials Inc's asset turnover of this year was 0.70714659. Applied Materials Inc's asset turnover of last year was 0.73318658. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+1+1+1+1+0+1+1+0
=7

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Applied Materials Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Applied Materials Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
Question 1 1101111111
Question 2 1111111111
Question 3 1001101111
Question 4 1111111101
Question 5 0101010101
Question 6 1010101100
Question 7 1110111011
Question 8 0001101101
Question 9 1001000100
F-score 7547757847

Applied Materials Inc Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
Question 1 1111111111
Question 2 1111111111
Question 3 1111111011
Question 4 1111000111
Question 5 1111100001
Question 6 1111001010
Question 7 0000111111
Question 8 1111000001
Question 9 1111000010
F-score 8888545477
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