At $91.24, is it worth a close look?
Today, we’ll take a look at well-established Applied Materials, Inc. (NASDAQ: AMAT). Shares of the company have received a lot of attention due to a substantial price movement on the NASDAQGS over the past few months, rising to US$119 at one point and falling to a low of US$86.00. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. A question that needs to be answered is does Applied Materials’ current trading price of US$91.24 reflect the true value of the large cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Applied Materials 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
Are the applied materials always cheap?
Good news, investors! Applied Materials is still a good deal right now according to my multiple price model, which compares the company’s price-to-earnings ratio to the industry average. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find Applied Materials’ ratio of 11.81x to be below its average of 16.97x, indicating that the stock is trading at a lower price than the semiconductor industry. However, since Applied Materials’ share is quite volatile (i.e. its price movements are amplified relative to the rest of the market), this could mean that the price may drop, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.
What kind of growth will Applied Materials generate?
Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. Applied Materials’ earnings growth is expected to be in the coming years, indicating a strong future. This should lead to robust cash flow, fueling higher share value.
What this means for you
Are you a shareholder? Given that the AMAT is currently below the industry PE ratio, now may be the perfect time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it appears that this growth has yet to be fully priced into the stock price. However, there are also other factors such as the capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been watching AMAT for a while, now might be the time to get into the stock. Its prosperous future earnings outlook is not yet fully reflected in the current share price, which means it is not too late to buy AMAT. But before making investment decisions, consider other factors such as the track record of its management team, in order to make an informed assessment.
Keep in mind that when it comes to analyzing a stock, it is worth noting the risks involved. For example, we found 1 warning sign which you should browse to get a better picture of the applied materials.
If you are no longer interested in Applied Materials, you can use our free platform to view our list of over 50 other stocks with high growth potential.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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