Newsletter Login

Username:

Password:


Need help logging in?

New Subscriber?
Start Here!

Q & A

I mostly follow your recommendations, but I also own two small-cap stocks with 100 Overall scores. Why are they not on one of your buy lists?



Read More from Q&A


Tools & Resources

Stock Spotlight

Go with the veteran — Applied Materials

Recent Price
$45
Dividend
$0.40
Yield
0.9%
P/E Ratio
17
Shares (millions)
1,087
Long-Term Debt as % of Capital
29%
52-Week Price Range
$45.74 - $22.17



Applied Materials ($45; AMAT) was around for the birth of the modern semiconductor, creating the first commercial system for depositing silicon dioxide on a chip in 1967. In the ensuing years, Applied Materials was an early mover in the market for equipment that made LED screens, and a pioneer in the use of chemical vapor, and later plasma vapor, to make semiconductors.

Of course, you won't make money buying yesterday's leader — unless it's also today's leader. In the last year, Applied Materials spent more than $1.5 billion (13% of revenue) on research & development to help it keep current. Today, the company says its products provide "atomic-level precision" for etching three-dimensional semiconductors.

Applied Materials earns a Quadrix Overall score of 96. The stock, which yields 0.9%, is a Buy and a Long-Term Buy.

Major player

As the world's biggest semiconductor-equipment maker, Applied Materials owns a piece of just about every pie. In recent quarters, the company has released new products to deal with industry trends such as the rise of 3-D NAND memory, increasing demand for OLED technology (light-emitting diodes that use an organic film) in mobile devices, and shrinking chip sizes (some as small as 10 nanometers). A nanometer is a billionth of a meter. Applied Materials has found big opportunity in small. 

In the January quarter, Applied Materials posted record growth in orders, with bookings outpacing billings by 28% as the market leader continued to grab share. Years of investment in streamlining manufacturing has paid off in the form of rising profit margins (operating margin of 25.4% in the last year, versus 18.6% three years ago), which gives the company plenty of bottom-line leverage during this period of strong revenue growth.

While the possibility of a cyclical slowdown always haunts this industry, the paradigm seems to be shifting. If revenue rises in fiscal 2018, as both the company and analysts expect, it will mark Applied Materials' fifth straight year of growth, a streak not seen since the early 1990s. The explosion of semiconductor manufacturing worldwide in recent years has reduced customer concentration for equipment makers. And as more and more non-consumer-driven industries rely on semiconductors for automation, demand has become more sustainable and probably less cyclical.

Staying on top

Fifty years of history suggests Applied Materials can remain at the front edge of technological advancements, which gives us confidence in the company's future growth. Sales rose 24%, per-share profits 75%, and operating cash flow 122% in the 12 months ended January. Analysts expect 52% growth in per-share profit this year, followed by 6% in fiscal 2018 ending October.

In the last seven quarters, Applied Materials spent $7.8 billion on stock buybacks, reducing its share count 12%. Management expects continued buybacks going forward. An annual report for Applied Materials Inc. is available at 3050 Bowers Ave., Santa Clara, CA 95052; (408) 727-5555;  www.appliedmaterials.com.


 

Applied Materials

 
Quarter
Per-Share Earnings
Sales Change
Quarterly Price Range
P/E Ratio Range
Jan '17
$0.67
vs.
$0.26
45%
$35.15
-
$28.02
20 - 16
Oct '16
0.66
vs.
0.29
39%
31.07
-
25.68
22 - 18
Jul '16
0.50
vs.
0.33
13%
27.11
-
19.46
22 - 16
Apr '16
0.34
vs.
0.29
0%
21.67
-
15.44
19 - 13

 
Year (Oct)
Sales (Bil.)
Per-Share Earnings*
Per-Share Dividend
52-Week Price Range
P/E Ratio Range
2016
$10.83
$1.75
$0.40
$31.07
-
$15.44
18 - 9
2015
9.66
1.19
0.40
25.71
-
14.25
22 - 12
2014
9.07
1.07
0.40
23.46
-
16.40
22 - 15
2013
7.51
0.59
0.39
18.18
-
9.95
31 - 17

 
Quadrix Scores†
Overall
Momentum
Value
Quality
Financial Strength
Earnings Estimates
Performance
96
99
55
92
74
83
93

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

More Investment Newsletters and Services

Drip Investor

DRIP Investor — how you can buy dividend-paying stocks without a broker.

Visit us at DRIP Investor, your source for dividend reinvestment plans.

Lazy Investor

The Lazy Investor — free weekly e-letter that delivers market updates and stock market information via email.

Visit us at The Lazy Investor, our free investment newsletter.

Horizon Investment

Horizon — registered investment advisor seeks to provide investors at all stages the ability to build, preserve and enjoy wealth.

Visit us at Horizon Investment Services to get started in an investment program that's right for you.

Upside

Upside — discovers today's small and midcap stocks poised to be tomorrow's Blue Chip leaders.

Visit us at Upside, your guide to the best buys in small and midcap stocks.

Current Hotline

Friday, May 26, 2017

The Dow Industrials and S&P 500 Index have advanced six straight days

Read More from the Hotline

Stock Spotlight

Go with the veteran — Applied Materials

Wednesday, May 24, 2017

Applied Materials ($45; AMAT) was around for the birth of the modern semiconductor, creating the first commercial system for depositing silicon dioxide on a chip in 1967. In the ensuing years...

Read More from Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com