Is Applied Materials, Inc. (NASDAQ:AMAT) Potentially Undervalued?

Applied Materials, Inc. (NASDAQ:AMAT) led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Applied Materials’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Applied Materials

What's The Opportunity In Applied Materials?

According to my valuation model, Applied Materials seems to be fairly priced at around 6.8% below my intrinsic value, which means if you buy Applied Materials today, you’d be paying a fair price for it. And if you believe that the stock is really worth $122.77, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Applied Materials’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Applied Materials generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 7.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Applied Materials, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in AMAT’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on AMAT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Applied Materials as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Applied Materials and we think they deserve your attention.

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.