Stock Analysis

At US$91.24, Is Applied Materials, Inc. (NASDAQ:AMAT) Worth Looking At Closely?

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NasdaqGS:AMAT
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Today we're going to take a look at the well-established Applied Materials, Inc. (NASDAQ:AMAT). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$119 at one point, and dropping to the lows of US$86.00. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Applied Materials' current trading price of US$91.24 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Applied Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Applied Materials

Is Applied Materials Still Cheap?

Good news, investors! Applied Materials is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Applied Materials’s ratio of 11.81x is below its peer average of 16.97x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. However, given that Applied Materials’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Applied Materials generate?

earnings-and-revenue-growth
NasdaqGS:AMAT Earnings and Revenue Growth September 2nd 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Applied Materials' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since AMAT is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on AMAT for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AMAT. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Applied Materials.

If you are no longer interested in Applied Materials, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Applied Materials?

Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries.

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Rewards

  • Trading at 26.8% below our estimate of its fair value

  • Earnings have grown 19% per year over the past 5 years

Risks

No risks detected for AMAT from our risks checks.

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Share Price

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About NasdaqGS:AMAT

Applied Materials

Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation5
Future Growth1
Past Performance3
Financial Health6
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet, undervalued and pays a dividend.