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Applied Materials Inc  (NAS:AMAT) Asset Turnover: 0.20 (As of Jul. 2017)

Asset Turnover measures how quickly a company turns over its asset through sales. It is calculated as Revenue divided by Total Assets. Applied Materials Inc's Revenue for the three months ended in Jul. 2017 was \$3,744 Mil. Applied Materials Inc's Total Assets for the quarter that ended in Jul. 2017 was \$18,659 Mil. Therefore, Applied Materials Inc's asset turnover for the quarter that ended in Jul. 2017 was 0.20.

Asset Turnover is linked to ROE % through Du Pont Formula. Applied Materials Inc's annualized ROE % for the quarter that ended in Jul. 2017 was 43.71%. It is also linked to ROA % through Du Pont Formula. Applied Materials Inc's annualized ROA % for the quarter that ended in Jul. 2017 was 19.83%.

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

 Oct07 Oct08 Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Asset Turnover 0.67 0.62 0.72 0.68 0.72

Applied Materials Inc Quarterly Data

 Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Asset Turnover 0.21 0.23 0.22 0.21 0.20

Calculation

Asset Turnover measures how quickly a company turns over its asset through sales.

Applied Materials Inc's Asset Turnover for the fiscal year that ended in Oct. 2016 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (A: Oct. 2016 ) / ( (Total Assets (A: Oct. 2015 ) + Total Assets (A: Oct. 2016 )) / 2 ) = 10825 / ( (15308 + 14588) / 2 ) = 10825 / 14948 = 0.72

Applied Materials Inc's Asset Turnover for the quarter that ended in Jul. 2017 is calculated as

 Asset Turnover = Sales / Average Total Assets = Revenue (Q: Jul. 2017 ) / ( (Total Assets (Q: Apr. 2017 ) + Total Assets (Q: Jul. 2017 )) / 2 ) = 3744 / ( (18240 + 19078) / 2 ) = 3744 / 18659 = 0.20

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

Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. Companies in the retail industry tend to have a very high turnover ratio.

Explanation

Asset Turnover is linked to Return on Equity (ROE) through Du Pont Formula.

Applied Materials Inc's annulized ROE % for the quarter that ended in Jul. 2017 is

 ROE % (Q: Jul. 2017 ) = Net Income / Total Equity = 3700 / 8464 = (Net Income / Revenue) * (Revenue / Total Assets) * (Total Assets / Total Equity) = (3700 / 14976) * (14976 / 18659) * (18659/ 8464) = Net Margin % * Asset Turnover * Leverage Ratio = 24.71 % * 0.8026 * 2.2045 = ROA % * Leverage Ratio = 19.83 % * 2.2045 = 43.71 %

Note: The Net Income data used here is four times the quarterly (Jul. 2017) net income data. The Revenue data used here is four times the quarterly (Jul. 2017) revenue data.

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

It is also linked to Return on Assets (ROA) through Du Pont Formula:

Applied Materials Inc's annulized ROA % for the quarter that ended in Jul. 2017 is

 ROA % (Q: Jul. 2017 ) = Net Income / Total Assets = 3700 / 18659 = (Net Income / Revenue) * (Revenue / Total Assets) = (3700 / 14976) * (14976 / 18659) = Net Margin % * Asset Turnover = 24.71 % * 0.8026 = 19.83 %

Note: The Net Income data used here is four times the quarterly (Jul. 2017) net income data. The Revenue data used here is four times the quarterly (Jul. 2017) revenue data.

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

Be Aware

In the article Joining The Dark Side: Pirates, Spies and Short Sellers, James Montier reported that In their US sample covering the period 1968-2003, Cooper et al find that firms with low asset growth outperformed firms with high asset growth by an astounding 20% p.a. equally weighted. Even when controlling for market, size and style, low asset growth firms outperformed high asset growth firms by 13% p.a. Therefore a company with fast asset growth may underperform.

Therefore, it is a good sign if a company's asset turnover is consistent or even increases. If a company's asset grows faster than sales, its asset turnover will decline, which can be a warning sign.

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