AMAT Stock Report

2-Year Price History

A Word Of Caution

Applied Materials, Incorporated (AMAT) has experienced a very significant drop in earnings and/or earnings estimates. In and of itself this drop in earnings could be an indication of greater troubles within the company.

Please take a moment to look at the RazorWire feed on the right hand side of the report to find more information regarding the company's dropoff in performance. Each time Applied Materials, Inc. is mentioned on business television recently should be displayed. This helps bring you up to date on any major issues they are facing right now.

Therefore, (and as always), check additional sources and available information regarding AMAT before making an investment decision.

Ockham's Rating

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AMAT Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at AMAT through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 4.95x and 2.55x respectively.

Utilizing this range we can see that AMAT’s current Price to Sales per share ratio of 1.57x is significantly below its average levels historically. In fact, with a current price of $11.13, AMAT is a full 59% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for AMAT.

AMAT Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently AMAT is significantly above its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from AMAT. For example, AMAT's Cash Earnings ratio per share has fluctuated between 17.28 and 31.68 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where AMAT is with respect to prior business periods.

So what does this tell us about AMAT in particular? Basically, we would value the current level of Cash Earnings per share (which is at 46.38) as significantly overvalued. Just by looking at the last closing price of AMAT, which was $11.13, we can see that compared to the historical high Price to Cash Earnings levels we calculated, the market has already rewarded AMAT with a higher stock price. So basically, we don't view this level of Cash Earnings or stock price as compatible with a long term value at this point. Just remember, that does not mean that AMAT may not have other merits with which to find a good investment opportunity, it just means that we would prefer to see either an increase in Cash Earnings or a decrease in stock price before we would become bullish on this metric.

AMAT Dividends

While it is not necessary to pay an attractive dividend or a dividend at all, to receive a positive rating from Ockham, we view dividends as an additionally helpful measure in determining the future potential of any company.

In AMAT’s case, the estimated annual dividend is $0.24 resulting in a current dividend yield of 2.16%. Similar to our review of Sales and Cash Earnings per share, we evaluate dividend yields from AMAT against the historic high and low levels over the past 10 years. The highest dividend yield from AMAT over this period was 3.85% while the lowest dividend yield was 0.00% Therefore, the current dividend yield of AMAT is above the historical median by 12.21%. This is definitely a positive in our view.