Analyzing Applied Materials, Inc.’s (NasdaqGS:AMAT) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess AMAT’s recent performance announced on 27 October 2019 and compare these figures to its long-term trend and industry movements.
Was AMAT’s recent earnings decline worse than the long-term trend and the industry?
AMAT’s trailing twelve-month earnings (from 27 October 2019) of US$2.7b has declined by -11% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 24%, indicating the rate at which AMAT is growing has slowed down. Why could this be happening? Well, let’s look at what’s going on with margins and if the entire industry is feeling the heat.
In terms of returns from investment, Applied Materials has invested its equity funds well leading to a 33% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15% exceeds the US Semiconductor industry of 6.6%, indicating Applied Materials has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Applied Materials’s debt level, has increased over the past 3 years from 20% to 23%.
What does this mean?
Though Applied Materials’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. You should continue to research Applied Materials to get a better picture of the stock by looking at:
- 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.
- Financial Health: Are AMAT’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 27 October 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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