Applied Materials Inc (NASDAQ:AMAT): The Best Of Both Worlds
Applied Materials Inc (NASDAQ:AMAT) is a stock with outstanding fundamental characteristics. When we build an investment case, we need to look at the stock with a holistic perspective. In the case of AMAT, it is a financially-healthy company with a a great track record of performance, trading at a discount. In the following section, I expand a bit more on these key aspects. If you’re interested in understanding beyond my high-level commentary, take a look at the report on Applied Materials here.
Established dividend payer and good value
Over the past few years, AMAT has demonstrated a proven ability to generate robust returns of 45.03% Not surprisingly, AMAT outperformed its industry which returned 13.83%, giving us more conviction of the company’s capacity to drive bottom-line growth going forward. AMAT’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This implies that AMAT manages its cash and cost levels well, which is a crucial insight into the health of the company. AMAT appears to have made good use of debt, producing operating cash levels of 0.75x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.
AMAT’s shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of AMAT’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the semiconductor industry, AMAT is also trading below its peers, relative to earnings generated. This supports the theory that AMAT is potentially underpriced.
Next Steps:
For Applied Materials, I’ve compiled three pertinent factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for AMAT’s future growth? Take a look at our free research report of analyst consensus for AMAT’s outlook.
Dividend Income vs Capital Gains: Does AMAT return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from AMAT as an investment.
Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of AMAT? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
