Applied Materials Inc Valuation – February 2019 $AMAT

Company Profile (excerpt from Reuters): Applied Materials, Inc. (Applied), incorporated on March 18, 1987, provides manufacturing equipment, services and software to the global semiconductor, display and related industries. The Company’s segments are Semiconductor Systems; Applied Global Services; Display and Adjacent Markets, and Corporate and Other. The Semiconductor Systems segment includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging and ion implantation. Its Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and solar products. The Display and Adjacent Markets segment includes products for manufacturing liquid crystal displays (LCDs), organic light-emitting diodes (OLEDs), upgrades and roll-to-roll Web coating systems and other display technologies for televisions, personal computers, smart phones and other consumer-oriented devices. The Corporate and Other segment includes revenues from products, as well as costs of products sold for fabricating solar photovoltaic cells and modules, and certain operating expenses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $37,944,390,515 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.64 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 306.70% Pass
6. Moderate PEmg Ratio PEmg < 20 14.85 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.74 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.79 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.68
MG Growth Estimate 15.00%
MG Value $103.13
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $38.84
MG Value based on 0% Growth $22.77
Market Implied Growth Rate 3.18%
Current Price $39.78
% of Intrinsic Value 38.57%

Applied Materials, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.76 in 2015 to an estimated $2.68 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.18% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Applied Materials, Inc. revealed the company was trading above its Graham Number of $20.6. The company pays a dividend of $0.6 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 14.85, which was below the industry average of 29.46, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-0.19.

Applied Materials, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$0.19
Graham Number $20.60
PEmg 14.85
Current Ratio 2.64
PB Ratio 5.74
Current Dividend $0.60
Dividend Yield 1.51%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $10,747,000,000
Total Current Liabilities $4,068,000,000
Long-Term Debt $5,309,000,000
Total Assets $17,773,000,000
Intangible Assets $3,581,000,000
Total Liabilities $10,934,000,000
Shares Outstanding (Diluted Average) 987,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.71
Oct2018 $3.23
Oct2017 $3.17
Oct2016 $1.54
Oct2015 $1.12
Oct2014 $0.87
Oct2013 $0.21
Oct2012 $0.09
Oct2011 $1.45
Oct2010 $0.70
Oct2009 -$0.23
Oct2008 $0.70
Oct2007 $1.20
Oct2006 $0.97
Oct2005 $0.73
Oct2004 $0.78
Oct2003 -$0.09
Oct2002 $0.16
Oct2001 $0.30
Oct2000 $1.20
Oct1999 $0.46

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.68
Oct2018 $2.44
Oct2017 $1.82
Oct2016 $1.02
Oct2015 $0.76
Oct2014 $0.60
Oct2013 $0.46
Oct2012 $0.57
Oct2011 $0.80
Oct2010 $0.54
Oct2009 $0.53
Oct2008 $0.90
Oct2007 $0.90
Oct2006 $0.67
Oct2005 $0.47
Oct2004 $0.39
Oct2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

5 Companies for Enterprising Investors Near 52 Week Lows – September 2018
Applied Materials Inc Valuation – April 2018 $AMAT
7 Best Undervalued Stocks of the Week – 9/3/16
Applied Materials Inc Valuation – August 2016 $AMAT
Applied Materials Inc Valuation – February 2016 $AMAT

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Applied Materials Inc Valuation – April 2018 $AMAT

Company Profile (excerpt from Reuters): Applied Materials, Inc. (Applied), incorporated on March 18, 1987, provides manufacturing equipment, services and software to the global semiconductor, display and related industries. The Company’s segments are Semiconductor Systems; Applied Global Services; Display and Adjacent Markets, and Corporate and Other. The Semiconductor Systems segment includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging and ion implantation. Its Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity, including spares, upgrades, services, certain remanufactured earlier generation equipment and factory automation software for semiconductor, display and solar products. The Display and Adjacent Markets segment includes products for manufacturing liquid crystal displays (LCDs), organic light-emitting diodes (OLEDs), upgrades and roll-to-roll Web coating systems and other display technologies for televisions, personal computers, smart phones and other consumer-oriented devices. The Corporate and Other segment includes revenues from products, as well as costs of products sold for fabricating solar photovoltaic cells and modules, and certain operating expenses.

AMAT Chart

AMAT data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $56,839,216,535 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.96 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 355.21% Pass
6. Moderate PEmg Ratio PEmg < 20 20.27 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.90 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.96 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.61 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.70
MG Growth Estimate 15.00%
MG Value $104.10
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $39.21
MG Value based on 0% Growth $22.98
Market Implied Growth Rate 5.88%
Current Price $54.80
% of Intrinsic Value 52.64%

Applied Materials, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.6 in 2014 to an estimated $2.7 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.88% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Applied Materials, Inc. revealed the company was trading above its Graham Number of $28.28. The company pays a dividend of $0.4 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 20.27, which was below the industry average of 51.31, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.75.

Applied Materials, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.75
Graham Number $28.28
PEmg 20.27
Current Ratio 2.96
PB Ratio 6.90
Current Dividend $0.40
Dividend Yield 0.73%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 1/1/2018
Total Current Assets $13,029,000,000
Total Current Liabilities $4,399,000,000
Long-Term Debt $5,305,000,000
Total Assets $19,663,000,000
Intangible Assets $3,730,000,000
Total Liabilities $11,157,000,000
Shares Outstanding (Diluted Average) 1,071,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.03
Oct2017 $3.17
Oct2016 $1.54
Oct2015 $1.12
Oct2014 $0.87
Oct2013 $0.21
Oct2012 $0.09
Oct2011 $1.45
Oct2010 $0.70
Oct2009 -$0.23
Oct2008 $0.70
Oct2007 $1.20
Oct2006 $0.97
Oct2005 $0.73
Oct2004 $0.78
Oct2003 -$0.09
Oct2002 $0.16
Oct2001 $0.30
Oct2000 $1.20
Oct1999 $0.46
Oct1998 $0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.70
Oct2017 $1.82
Oct2016 $1.02
Oct2015 $0.76
Oct2014 $0.60
Oct2013 $0.46
Oct2012 $0.57
Oct2011 $0.80
Oct2010 $0.54
Oct2009 $0.53
Oct2008 $0.90
Oct2007 $0.90
Oct2006 $0.67
Oct2005 $0.47
Oct2004 $0.39
Oct2003 $0.26
Oct2002 $0.44

Recommended Reading:

Other ModernGraham posts about the company

Applied Materials Inc Valuation – February 2016 $AMAT
Applied Materials Inc Valuation – November 2015 Update $AMAT
Applied Materials Inc. Analysis – August 2015 Update $AMAT
47 Companies in the Spotlight This Week – 5/16/15
Applied Materials Inc. Quarterly Valuation – May 2015 $AMAT

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Applied Materials Inc Valuation – August 2016 $AMAT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Applied Materials Inc (AMAT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Applied Materials, Inc. (Applied) provides manufacturing equipment, services and software to the semiconductor, display, solar photovoltaic (PV) and related industries across the world. The Company operates in four segments: Silicon Systems, Applied Global Services, Display, and Energy and Environmental Solutions. Its manufacturing activities consist of assembly, test and integration of various commercial parts, components and subassemblies that are used to manufacture systems. Its products include Centura RP Epi, VIISta Systems, Vantage Systems, AKT PECVD Systems, AKT Aristo and PiVot Systems. It caters to customers, including manufacturers of semiconductor chips, liquid crystal and other displays, solar PV cells and other electronic devices. It has implemented a distributed manufacturing model under which manufacturing and supply chain activities are conducted in various countries, including Germany, Israel, Italy, Singapore, Taiwan, the United States and other countries in Asia.

AMAT Chart

AMAT data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $32,744,008,304 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.50 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 117.96% Pass
6. Moderate PEmg Ratio PEmg < 20 28.36 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.80 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.50 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.75 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AMAT value chart August 2016

EPSmg $1.06
MG Growth Estimate 12.68%
MG Value $35.77
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $15.32
MG Value based on 0% Growth $8.98
Market Implied Growth Rate 9.93%
Current Price $29.97
% of Intrinsic Value 83.78%

Applied Materials, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.57 in 2012 to an estimated $1.06 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 9.93% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Applied Materials, Inc. revealed the company was trading above its Graham Number of $15.25. The company pays a dividend of $0.4 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 28.36, which was above the industry average of 22.64. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.47.

Applied Materials, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

AMAT charts August 2016

Net Current Asset Value (NCAV) $0.47
Graham Number $15.25
PEmg 28.36
Current Ratio 2.50
PB Ratio 4.80
Current Dividend $0.40
Dividend Yield 1.33%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 7/1/2016
Total Current Assets $7,399,000,000
Total Current Liabilities $2,964,000,000
Long-Term Debt $3,343,000,000
Total Assets $13,699,000,000
Intangible Assets $3,926,000,000
Total Liabilities $6,880,000,000
Shares Outstanding (Diluted Average) 1,093,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.65
Oct2015 $1.12
Oct2014 $0.87
Oct2013 $0.21
Oct2012 $0.09
Oct2011 $1.45
Oct2010 $0.70
Oct2009 -$0.23
Oct2008 $0.70
Oct2007 $1.20
Oct2006 $0.97
Oct2005 $0.73
Oct2004 $0.78
Oct2003 -$0.09
Oct2002 $0.16
Oct2001 $0.30
Oct2000 $1.20
Oct1999 $0.46
Oct1998 $0.15
Oct1997 $0.33
Oct1996 $0.41

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.06
Oct2015 $0.76
Oct2014 $0.60
Oct2013 $0.46
Oct2012 $0.57
Oct2011 $0.80
Oct2010 $0.54
Oct2009 $0.53
Oct2008 $0.90
Oct2007 $0.90
Oct2006 $0.67
Oct2005 $0.47
Oct2004 $0.39
Oct2003 $0.26
Oct2002 $0.44
Oct2001 $0.55
Oct2000 $0.62

Recommended Reading:

Other ModernGraham posts about the company

Applied Materials Inc Valuation – February 2016 $AMAT
Applied Materials Inc Valuation – November 2015 Update $AMAT
Applied Materials Inc Valuation – November 2015 Update $AMAT
Applied Materials Inc. Analysis – August 2015 Update $AMAT
47 Companies in the Spotlight This Week – 5/16/15

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Applied Materials Inc Valuation – February 2016 $AMAT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Applied Materials Inc (AMAT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Applied Materials, Inc. (Applied) provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. The Silicon Systems Group segment develops, manufactures and sells manufacturing equipment used to fabricate semiconductor chips. The Applied Global Services segment encompasses services, products and integrated solutions to optimize equipment and fab performance and productivity. The Display Segment includes products for manufacturing liquid crystal displays, organic light-emitting diodes and other display technologies for televisions, personal computers, tablets, smartphones and other devices. The Energy and Environmental Solutions segment includes systems for manufacturing wafer-based crystalline silicon cells and modules.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $21,760,932,325 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.00 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 86.83% Pass
6. Moderate PEmg Ratio PEmg < 20 21.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.04 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.00 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.73 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AMAT value chart February 2016

EPSmg $0.88
MG Growth Estimate 8.14%
MG Value $21.88
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $12.81
MG Value based on 0% Growth $7.51
Market Implied Growth Rate 6.44%
Current Price $18.89
% of Intrinsic Value 86.32%

Applied Materials, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.57 in 2012 to an estimated $0.88 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Applied Materials, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

AMAT charts February 2016

Net Current Asset Value (NCAV) $0.65
Graham Number $12.57
PEmg 21.38
Current Ratio 3.00
PB Ratio 3.04
Dividend Yield 2.12%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Jan2016
Total Current Assets $6,910,000,000
Total Current Liabilities $2,307,000,000
Long-Term Debt $3,343,000,000
Total Assets $13,326,000,000
Intangible Assets $4,016,000,000
Total Liabilities $6,158,000,000
Shares Outstanding (Diluted Average) 1,154,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.13
Oct2015 $1.12
Oct2014 $0.87
Oct2013 $0.21
Oct2012 $0.09
Oct2011 $1.45
Oct2010 $0.70
Oct2009 -$0.23
Oct2008 $0.70
Oct2007 $1.20
Oct2006 $0.97
Oct2005 $0.73
Oct2004 $0.78
Oct2003 -$0.09
Oct2002 $0.16
Oct2001 $0.30
Oct2000 $1.20
Oct1999 $0.46
Oct1998 $0.15
Oct1997 $0.33
Oct1996 $0.41

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.88
Oct2015 $0.76
Oct2014 $0.60
Oct2013 $0.46
Oct2012 $0.57
Oct2011 $0.80
Oct2010 $0.54
Oct2009 $0.53
Oct2008 $0.90
Oct2007 $0.90
Oct2006 $0.67
Oct2005 $0.47
Oct2004 $0.39
Oct2003 $0.26
Oct2002 $0.44
Oct2001 $0.55
Oct2000 $0.62

Recommended Reading:

Other ModernGraham posts about the company

Applied Materials Inc Valuation – November 2015 Update $AMAT
Applied Materials Inc. Analysis – August 2015 Update $AMAT
47 Companies in the Spotlight This Week – 5/16/15
Applied Materials Inc. Quarterly Valuation – May 2015 $AMAT
58 Companies in the Spotlight This Week – 1/31/15

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Texas Instruments Inc Valuation – February 2016 $TXN
Apple Inc Valuation – February 2016 $AAPL
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MTS Systems Corp Valuation – February 2016 Update $MTSC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Applied Materials Inc Valuation – November 2015 Update $AMAT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Applied Materials Inc. (AMAT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Applied Materials, Inc. (Applied) provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. The Silicon Systems Group segment develops, manufactures and sells manufacturing equipment used to fabricate semiconductor chips. The Applied Global Services segment encompasses services, products and integrated solutions to optimize equipment and fab performance and productivity. The Display Segment includes products for manufacturing liquid crystal displays, organic light-emitting diodes and other display technologies for televisions, personal computers, tablets, smartphones and other devices. The Energy and Environmental Solutions segment includes systems for manufacturing wafer-based crystalline silicon cells and modules.

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,254,564,866 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.33 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -33.45% Fail
6. Moderate PEmg Ratio PEmg < 20 25.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.60 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.33 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.38 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

AMAT value Chart November 2015

EPSmg $0.66
MG Growth Estimate -2.60%
MG Value $2.18
Opinion Overvalued
MG Value based on 3% Growth $9.56
MG Value based on 0% Growth $5.60
Market Implied Growth Rate 8.53%
Current Price $16.85
% of Intrinsic Value 772.63%

Applied Materials Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years and the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned with the lack of earnings growth over the last five years.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $0.80 in 2011 to an estimated $0.66 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 8.53% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Applied Materials Inc. (AMAT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AMAT Charts November 2015

Net Current Asset Value (NCAV) $1.52
Graham Number $11.00
PEmg 25.56
Current Ratio 2.33
PB Ratio 2.60
Dividend Yield 2.37%
Number of Consecutive Years of Dividend Growth 6

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $7,043,000,000
Total Current Liabilities $3,020,000,000
Long-Term Debt $1,547,000,000
Total Assets $13,153,000,000
Intangible Assets $4,115,000,000
Total Liabilities $5,176,000,000
Shares Outstanding (Diluted Average) 1,231,600,000

Earnings Per Share History

Next Fiscal Year Estimate $0.83
Oct14 $0.87
Oct13 $0.21
Oct12 $0.09
Oct11 $1.45
Oct10 $0.70
Oct09 -$0.23
Oct08 $0.70
Oct07 $1.20
Oct06 $0.97
Oct05 $0.73
Oct04 $0.78
Oct03 -$0.09
Oct02 $0.16
Oct01 $0.30
Oct00 $1.20
Oct99 $0.46
Oct98 $0.15
Oct97 $0.33
Oct96 $0.41

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.66
Oct14 $0.60
Oct13 $0.46
Oct12 $0.57
Oct11 $0.80
Oct10 $0.54
Oct09 $0.53
Oct08 $0.90
Oct07 $0.90
Oct06 $0.67
Oct05 $0.47
Oct04 $0.39
Oct03 $0.26
Oct02 $0.44
Oct01 $0.55
Oct00 $0.62
Oct99 $0.31

Recommended Reading:

Other ModernGraham posts about the company

Applied Materials Inc. Analysis – August 2015 Update $AMAT
47 Companies in the Spotlight This Week – 5/16/15
Applied Materials Inc. Quarterly Valuation – May 2015 $AMAT
58 Companies in the Spotlight This Week – 1/31/15
Applied Materials Inc. Quarterly Valuation – January 2015 $AMAT

Other ModernGraham posts about related companies

Micron Technology Inc. Valuation – November 2015 Update $MU
Xilinx Inc. Valuation – November 2015 Update $XLNX
Ametek Inc. Valuation – November 2015 Update $AME
Skyworks Solutions Inc. Valuation – October 2015 Update $SWKS
Agilent Technologies Inc. Valuation – October 2015 Update $A
Western Digital Corporation Valuation – October 2015 Update $WDC
MTS Systems Corporation Valuation – October 2015 Update $MTSC
Linear Technology Corp Valuation – October 2015 Update $LLTC
Altera Corporation Analysis – October 2015 Update $ALTR
Lam Research Corporation Analysis – October 2015 Update $LRCX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Applied Materials Inc. Analysis – August 2015 Update $AMAT

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Applied Materials Inc. (AMAT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Applied Materials, Inc. (Applied) provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. Applied’s customers include manufacturers of semiconductor wafers and chips, flat panel liquid crystal displays (LSDs), PV cells and modules, and other electronic devices. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. Applied’s Silicon Systems Group segment develops, manufactures and sells manufacturing equipment used to fabricate semiconductor chips. Applied’s products for manufacturing LCDs, organic light-emitting diode, and display technologies for televisions, personal computers, tablets and smartphones are reported under its Display segment. The Energy and Environmental Solutions segment includes systems for manufacturing wafer-based crystalline silicon cells and modules.

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AMAT – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg 0.78
MG Growth Estimate -0.40%
MG Value $5.97
Opinion Overvalued
MG Value based on 3% Growth $11.25
MG Value based on 0% Growth $6.60
Market Implied Growth Rate 6.90%
Current Price $17.31
% of Intrinsic Value 289.80%

Applied Materials Inc. qualifies for the Enterprising Investor but is not suitable for the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the lack of earnings growth over the last five years.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $0.80 in 2011 to an estimated $0.78 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 6.9% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Applied Materials Inc. (AMAT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AMAT charts August 2015

Net Current Asset Value (NCAV) $1.78
PEmg 22.31
Current Ratio 2.76
PB Ratio 2.57
Dividend Yield 2.31%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $7,447,000,000
Total Current Liabilities $2,696,000,000
Long-Term Debt $1,947,000,000
Total Assets $13,587,000,000
Intangible Assets $4,164,000,000
Total Liabilities $5,236,000,000
Outstanding Shares 1,241,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.18
Oct14 $0.87
Oct13 $0.21
Oct12 $0.09
Oct11 $1.45
Oct10 $0.70
Oct09 -$0.23
Oct08 $0.70
Oct07 $1.20
Oct06 $0.97
Oct05 $0.73
Oct04 $0.78
Oct03 -$0.09
Oct02 $0.16
Oct01 $0.30
Oct00 $1.20
Oct99 $0.46
Oct98 $0.15
Oct97 $0.33
Oct96 $0.41
Oct95 $0.32

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.78
Oct14 $0.60
Oct13 $0.46
Oct12 $0.57
Oct11 $0.80
Oct10 $0.54
Oct09 $0.53
Oct08 $0.90
Oct07 $0.90
Oct06 $0.67
Oct05 $0.47
Oct04 $0.39
Oct03 $0.26
Oct02 $0.44
Oct01 $0.55
Oct00 $0.62
Oct99 $0.33

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Applied Materials Inc. Quarterly Valuation – May 2015 $AMAT
58 Companies in the Spotlight This Week – 1/31/15
Applied Materials Inc. Quarterly Valuation – January 2015 $AMAT
14 Companies in the Spotlight This Week – 10/18/14

Other ModernGraham posts about related companies

Xilinx Inc. Analysis – August 2015 Update $XLNX
Qorvo Inc. Analysis – Initial Coverage $QRVO
Agilent Technologies Inc. Analysis – July 2015 Update $A
Skyworks Solutions Inc. Analysis – Initial Coverage $SWKS
Western Digital Corporation Analysis – July 2015 Update $WDC
MTS Systems Corporation Analysis – July 2015 Update $MTSC
Linear Technology Corporation Analysis – July 2015 Update $LLTC
Altera Corporation Analysis – July 2015 Update $ALTR
Lam Research Corporation Analysis – June 2015 Update $LRCX
Analog Devices Stock Analysis – June 2015 Update $ADI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Applied Materials Inc. Quarterly Valuation – May 2015 $AMAT

logoDesktopBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – April 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Applied Materials Inc. (AMAT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Applied Materials, Inc. (Applied) provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. Applied’s customers include manufacturers of semiconductor wafers and chips, flat panel liquid crystal displays (LSDs), PV cells and modules, and other electronic devices. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. Applied’s Silicon Systems Group segment develops, manufactures and sells manufacturing equipment used to fabricate semiconductor chips. Applied’s products for manufacturing LCDs, organic light-emitting diode, and display technologies for televisions, personal computers, tablets and smartphones are reported under its Display segment. The Energy and Environmental Solutions segment includes systems for manufacturing wafer-based crystalline silicon cells and modules.
AMAT Chart

AMAT data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 -PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $19.85
MG Value $5.61
MG Opinion Overvalued
Value Based on 3% Growth $11.11
Value Based on 0% Growth $6.51
Market Implied Growth Rate 8.71%
Net Current Asset Value (NCAV) $1.56
PEmg 25.91
Current Ratio 2.75
PB Ratio 3.05

Balance Sheet – March 2015

Current Assets $6,933,000,000
Current Liabilities $2,521,000,000
Total Debt $1,947,000,000
Total Assets $13,073,000,000
Intangible Assets $4,209,000,000
Total Liabilities $5,001,000,000
Outstanding Shares 1,240,000,000

Earnings Per Share

2015 (estimate) $1.15
2014 $0.87
2013 $0.21
2012 $0.09
2011 $1.45
2010 $0.70
2009 -$0.23
2008 $0.70
2007 $1.20
2006 $0.97
2005 $0.73

Earnings Per Share – ModernGraham

2015 (estimate) $0.77
2014 $0.60
2013 $0.46
2012 $0.57
2011 $0.80
2010 $0.54

Dividend History
AMAT Dividend Chart

AMAT Dividend data by YCharts

Conclusion:

Applied Materials Inc. is suitable for the Enterprising Investor but not for the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the lack of growth over the last five years.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $0.80 in 2011 to an estimated $0.77 for 2015.  This level of demonstrated growth does not support the market’s implied estimate of 8.71% annual earnings growth over the next 7-10 years and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value falling below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Applied Materials Inc. (AMAT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Applied Materials Inc. Quarterly Valuation – January 2015 $AMAT

logoDesktop

Applied Materials is suitable for the Enterprising Investor, but not the more conservative Defensive Investor, who is concerned with the insufficient earnings growth and stability over the last ten years, as well as the high PEmg and PB ratios. The Enterprising Investor, on the other hand, has no initial concerns. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $0.54 in 2010 to only $0.60 for 2014. This demonstrated growth does not support the market’s implied estimate of 15.22%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Applied Materials Inc. (AMAT) for greater perspective!

Read the full valuation on Seeking Alpha!

AMAT Chart

AMAT data by YCharts

Disclaimer:  The author did not hold a position in Applied Materials Inc. (AMAT) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Applied Materials Inc. Quarterly Stock Valuation – October 2014 $AMAT

logoDesktopBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Highest Dividend Yields Among Undervalued Companies for the Defensive Investor – September 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Applied Materials Inc. (AMAT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Applied Materials, Inc. (Applied) provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. Applied’s customers include manufacturers of semiconductor wafers and chips, flat panel liquid crystal displays (LCDs), solar PV cells and modules, and other electronic devices. These customers may use what they manufacture in their own end products or sell the items to other companies for use in advanced electronic components. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. In November 2011, the Company acquired Varian Semiconductor Associates, Inc.
AMAT Chart

AMAT data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 5/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $19.87
MG Value $7.85
MG Opinion Overvalued
Value Based on 3% Growth $10.15
Value Based on 0% Growth $5.95
Market Implied Growth Rate 9.94%
Net Current Asset Value (NCAV) $1.21
PEmg 28.39
Current Ratio 2.41
PB Ratio 3.15

Balance Sheet – 7/27/2014

Current Assets $6,640,000,000
Current Liabilities $2,755,000,000
Total Debt $1,947,000,000
Total Assets $12,851,000,000
Intangible Assets $4,273,000,000
Total Liabilities $5,167,000,000
Outstanding Shares 1,218,400,000

Earnings Per Share

2014 (estimate) $0.90
2013 $0.21
2012 $0.42
2011 $1.45
2010 $1.00
2009 -$0.23
2008 $0.70
2007 $1.20
2006 $1.05
2005 $0.73
2004 $0.85

Earnings Per Share – ModernGraham

2014 (estimate) $0.70
2013 $0.59
2012 $0.74
2011 $0.88
2010 $0.64
2009 $0.54

Dividend History
AMAT Dividend Chart

AMAT Dividend data by YCharts

Conclusion:

Applied Materials is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has concerns with the company’s lack of sufficient earnings growth or stability over the last ten  years, and high PEmg and PB ratios.  The Enterprising Investor, on the other hand, has no initial concerns.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.64 in 2010 to an estimated $0.70 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 9.94% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Applied Materials Inc. (AMAT)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Applied Materials Inc. (AMAT) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Amphenol Corp Valuation – March 2019 #APH

Company Profile (excerpt from Reuters): Amphenol Corporation (Amphenol), incorporated on December 19, 1986, is a designer, manufacturer and marketer of electrical, electronic and fiber optic connectors, interconnect systems, antennas, sensors and sensor- based products, and coaxial and specialty cable. The Company operates through two segments, which include Interconnect Products and Assemblies, and Cable Products and Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of APH – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,058,928,491 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 112.11% Pass
6. Moderate PEmg Ratio PEmg < 20 29.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 7.18 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.32 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.25
MG Growth Estimate 8.07%
MG Value $80.00
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $47.09
MG Value based on 0% Growth $27.60
Market Implied Growth Rate 10.26%
Current Price $94.26
% of Intrinsic Value 117.83%

Amphenol Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.11 in 2015 to an estimated $3.25 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Amphenol Corporation revealed the company was trading above its Graham Number of $34.36. The company pays a dividend of $0.88 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 29.03, which was below the industry average of 35.5, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-4.55.

Amphenol Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$4.55
Graham Number $34.36
PEmg 29.03
Current Ratio 1.86
PB Ratio 7.18
Current Dividend $0.88
Dividend Yield 0.93%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $4,571,600,000
Total Current Liabilities $2,451,300,000
Long-Term Debt $2,806,400,000
Total Assets $10,044,900,000
Intangible Assets $4,501,100,000
Total Liabilities $5,980,700,000
Shares Outstanding (Diluted Average) 309,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.90
Dec2018 $3.85
Dec2017 $2.06
Dec2016 $2.61
Dec2015 $2.41
Dec2014 $2.21
Dec2013 $1.96
Dec2012 $1.69
Dec2011 $1.53
Dec2010 $1.41
Dec2009 $0.92
Dec2008 $1.17
Dec2007 $0.97
Dec2006 $0.70
Dec2005 $0.57
Dec2004 $0.46
Dec2003 $0.30
Dec2002 $0.23
Dec2001 $0.24
Dec2000 $0.32
Dec1999 $0.12

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.25
Dec2018 $2.82
Dec2017 $2.29
Dec2016 $2.33
Dec2015 $2.11
Dec2014 $1.89
Dec2013 $1.66
Dec2012 $1.45
Dec2011 $1.29
Dec2010 $1.12
Dec2009 $0.94
Dec2008 $0.89
Dec2007 $0.70
Dec2006 $0.53
Dec2005 $0.42
Dec2004 $0.33
Dec2003 $0.26

Recommended Reading:

Other ModernGraham posts about the company

Amphenol Corp Valuation – May 2018 $APH
5 Best Stocks for Value Investors This Week – 2/25/17
Amphenol Corp Valuation – February 2017 $APH
21 Best Undervalued Stocks of the Week – 8/27/16
Amphenol Corporation Valuation – August 2016 $APH

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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