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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
8 (As of Today)

Good Sign:

Piotroski F-Score of 8 is 8, 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 8. 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: 1   Max: 9
Current: 8

1
9

During the past 13 years, the highest Piotroski F-Score of Applied Materials Inc was 9. The lowest was 1. 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 (Apr17) TTM:Last Year (Apr16) TTM:
Net Income was 505 + 610 + 703 + 824 = $2,642 Mil.
Cash Flow from Operations was 981 + 797 + 646 + 898 = $3,322 Mil.
Revenue was 2821 + 3297 + 3278 + 3546 = $12,942 Mil.
Gross Profit was 1192 + 1399 + 1445 + 1600 = $5,636 Mil.
Average Total Assets from the begining of this year (Apr16)
to the end of this year (Apr17) was
(13075 + 13699 + 14588 + 15244 + 18240) / 5 = $14969.2 Mil.
Total Assets at the begining of this year (Apr16) was $13,075 Mil.
Long-Term Debt was $5,302 Mil.
Total Current Assets was $12,018 Mil.
Total Current Liabilities was $4,097 Mil.
Net Income was 329 + 336 + 286 + 320 = $1,271 Mil.

Revenue was 2490 + 2368 + 2257 + 2450 = $9,565 Mil.
Gross Profit was 1018 + 959 + 916 + 1004 = $3,897 Mil.
Average Total Assets from the begining of last year (Apr15)
to the end of last year (Apr16) was
(13587 + 13153 + 15308 + 13326 + 13075) / 5 = $13689.8 Mil.
Total Assets at the begining of last year (Apr15) was $13,587 Mil.
Long-Term Debt was $3,343 Mil.
Total Current Assets was $6,728 Mil.
Total Current Liabilities was $2,611 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 2,642. ==> 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 3,322. ==> 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 0.20206501. Applied Materials Inc's return on assets of last year was 0.0935453. ==> 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 2,642. Applied Materials Inc's current cash flow from operations (TTM) was 3,322. ==> 3,322 > 2,642 ==> 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: Apr17)=Long-Term Debt/Average Total Assets from Apr16 to Apr17
=5302/14969.2
=0.35419394

Gearing (Last Year: Apr16)=Long-Term Debt/Average Total Assets from Apr15 to Apr16
=3343/13689.8
=0.24419641

Applied Materials Inc's gearing of this year was 0.35419394. Applied Materials Inc's gearing of last year was 0.24419641. ==> Last year is lower than this year ==> Score 0.

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: Apr17)=Total Current Assets/Total Current Liabilities
=12018/4097
=2.93336588

Current Ratio (Last Year: Apr16)=Total Current Assets/Total Current Liabilities
=6728/2611
=2.5767905

Applied Materials Inc's current ratio of this year was 2.93336588. Applied Materials Inc's current ratio of last year was 2.5767905. ==> This year's current ratio is higher. ==> Score 1.

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 1087. Applied Materials Inc's number of shares in issue last year was 1119. ==> 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
=5636/12942
=0.43548138

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=3897/9565
=0.4074229

Applied Materials Inc's gross margin of this year was 0.43548138. Applied Materials Inc's gross margin of last year was 0.4074229. ==> 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 (Apr16)
=12942/13075
=0.98982792

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Apr15)
=9565/13587
=0.70398175

Applied Materials Inc's asset turnover of this year was 0.98982792. Applied Materials Inc's asset turnover of last year was 0.70398175. ==> This year's asset turnover is higher. ==> Score 1.

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+0+1+1+1+1
=8

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

Applied Materials Inc has an F-score of 8. 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

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
Question 1 1111111111
Question 2 1111111111
Question 3 1111101111
Question 4 1100011111
Question 5 1110000110
Question 6 1100101001
Question 7 0011111111
Question 8 1100000111
Question 9 1100001011
F-score 8854547788
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