Applied Materials Inc (AMAT, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $139.2, Applied Materials Inc has witnessed a decline of 3.71% over a period, marked against a three-month change of -0.28%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Applied Materials Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Applied Materials Inc has been assigned the following ranks:
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 9/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, and decent ranks in GF value and momentum, GuruFocus assigned Applied Materials Inc the GF Score of 94 out of 100, which signals the highest outperformance potential.
Understanding Applied Materials Inc Business
Applied Materials Inc, with a market cap of $116.45 billion, is the world's largest supplier of semiconductor manufacturing equipment, providing materials engineering solutions to help make nearly every chip in the world. The firm's systems are used in nearly every major process step with the exception of lithography. Key tools include those for chemical and physical vapor deposition, etching, chemical mechanical polishing, wafer- and reticle-inspection, critical dimension measurement, and defect inspection scanning electron microscopes. The company has reported sales of $26.54 billion and an operating margin of 28.92%.
Financial Strength Breakdown
According to the Financial Strength rating, Applied Materials Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure.
The Interest Coverage ratio for Applied Materials Inc stands impressively at 24.76, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-Score of 8.81, Applied Materials Inc exhibits a strong defense against financial distress, highlighting its robust financial stability.
With a favorable Debt-to-Revenue ratio of 0.23, Applied Materials Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Applied Materials Inc's impressive standing among its peers in generating profit.
Applied Materials Inc Operating Margin has increased (12.29%) over the past five years, as shown by the following data: 2018: 26.88; 2019: 22.93; 2020: 25.38; 2021: 31.22; 2022: 30.19; .
Furthermore, Applied Materials Inc's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 45; 2019: 43.72; 2020: 44.72; 2021: 47.32; 2022: 46.51; . This trend underscores the company's growing proficiency in transforming revenue into profit.
Applied Materials Inc's strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Applied Materials Inc demonstrates a strong commitment to expanding its business.
The company's 3-Year Revenue Growth Rate is 23.9%, which outperforms better than 75.14% of 869 companies in the Semiconductors industry
Moreover, Applied Materials Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 32.1, and the rate over the past five years is 18.3. This trend accentuates the company's continued capability to drive growth.
Conclusion
With its strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights Applied Materials Inc's unparalleled position for potential outperformance. This comprehensive analysis underscores the company's robust financial health and its potential to deliver substantial returns to investors in the near future.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
