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Are Investors Undervaluing Applied Materials (AMAT) Right Now?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Applied Materials (AMAT). AMAT is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 13.24. This compares to its industry's average Forward P/E of 16.97. Over the past year, AMAT's Forward P/E has been as high as 13.93 and as low as 7.38, with a median of 10.20.

Another notable valuation metric for AMAT is its P/B ratio of 4.94. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 7.79. Over the past year, AMAT's P/B has been as high as 7.90 and as low as 4.17, with a median of 5.08.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AMAT has a P/S ratio of 2.43. This compares to its industry's average P/S of 2.99.

Finally, investors should note that AMAT has a P/CF ratio of 10.38. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. AMAT's current P/CF looks attractive when compared to its industry's average P/CF of 18.27. Within the past 12 months, AMAT's P/CF has been as high as 15.92 and as low as 7.57, with a median of 9.67.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Applied Materials is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AMAT feels like a great value stock at the moment.


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