Applied Materials Inc (AMAT, Financial) experienced a noteworthy daily gain of 5.25 percent, complemented by a solid 3-month gain of 4.42 percent. With an Earnings Per Share (EPS) of $7.58, investors are keen to understand whether the stock is fairly valued. This article delves into a comprehensive valuation analysis to answer this pivotal question.
Company Introduction
As the world's largest semiconductor wafer fabrication equipment manufacturer, Applied Materials Inc (AMAT, Financial) boasts a broad portfolio and a leading market share in deposition. The company's clientele includes giants such as TSMC, Intel, and Samsung. With a current stock price of $150.68 and a GF Value of $143.43, a comparison of these figures provides a basis for a nuanced examination of Applied Materials' intrinsic value.
Summarize GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock. Applied Materials (AMAT, Financial) appears fairly valued according to this measure, which incorporates historical trading multiples, a GuruFocus adjustment factor from the company's past performance, and future business performance estimates. The stock's current price of $150.68 aligns closely with the GF Value, suggesting that the stock is trading at its fair value.
Because Applied Materials is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth. This presents an opportunity for investors looking for stable investments aligned with the company's growth trajectory.
Financial Strength
Investing in companies with a solid financial strength is crucial to minimize the risk of permanent loss. Applied Materials has a cash-to-debt ratio of 1.07, indicating a strong financial position, despite being lower than 62.25% of peers in the Semiconductors industry. The company's overall financial strength is rated as 8 out of 10, which is a testament to its robust financials.
Profitability and Growth
Applied Materials has a consistent track record of profitability, with high profit margins that suggest a safer investment profile. The company's operating margin of 28.92% is commendable, ranking higher than 92.87% of competitors. Furthermore, the company's growth is notable, with a 3-year average annual revenue growth of 23.9%, surpassing 74.8% of industry counterparts.
ROIC vs WACC
A critical assessment of a company's profitability involves comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). Applied Materials' ROIC of 32.44 is more than double its WACC of 15.29, indicating the company is effectively creating value for its shareholders.
Conclusion
Conclusively, Applied Materials (AMAT, Financial) stands as a fairly valued entity in the market. The company's strong financial condition, robust profitability, and impressive growth metrics position it as an attractive investment. For a deeper insight into Applied Materials' financials, one can explore their 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider visiting the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
