Applied Materials Inc (AMAT) stock analysis

P/E above its 5-year median

Applied Materials's P/E of 34.1 is above its own 5-year median of 20.7.

P/E below the industry

Applied Materials's P/E of 34.1 is below the Electronic Components and Accessories median of 34.8.

EV/EBITDA above its 5-year median

Applied Materials's EV/EBITDA of 32.3 is above its 5-year median of 16.6.

P/B above the industry

Applied Materials's price-to-book of 12.23 is above the Electronic Components and Accessories median of 3.49.

Trading above fair value

The share price of $395.08 is above our fair value estimate of $279.94.

Margin of safety under 20%

The price is 41.1% above fair value, so there is no margin of safety.

Revenue growing under 10% a year

Revenue grew 3.2% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew 5.2% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 35.6% over the last twelve months, against a 5-year average of 14.1% a year.

Growing slower than the industry

Revenue grew 7.8% over the last twelve months; the Electronic Components and Accessories median is 17.3%.

Guidance issued

The latest outlook (fourth quarter of fiscal 2026 Non-GAAP diluted EPS, Aug 13, 2026) was issued for the first time, so it neither adds nor takes away points.

Gross margin improving

Gross margin was 49.4% over the last twelve months, against 48.5% a year earlier.

Return on equity over 15%

Return on equity was 41.1% over the last twelve months and averaged 45.8% over five years.

Return on capital over 10%

Return on invested capital was 36.2%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Applied Materials's return on equity of 41.1% is above the Electronic Components and Accessories median of 4.8%.

Earnings grew over 5 years

Net income grew 14.1% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 30.1% over the last twelve months, against a 5-year average of 25.6%.

Net margin above the industry

Applied Materials's net margin of 30.1% is above the Electronic Components and Accessories median of 2.9%.

Low debt

Debt is 30.2% of shareholders' equity, under the 40% we consider low.

Debt falling against equity

Debt to equity fell from 51.5% five years ago to 30.2%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 108% of total debt.

Interest well covered

Operating income covers interest expense 33.0 times.

Short-term assets cover short-term debts

Current assets are 2.42 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 14.29; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Applied Materials paid dividends worth 0.5% of the share price over the last twelve months.

Yield below Treasuries

The 0.5% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 3.8% or more; Applied Materials yields 0.5%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 16.3% of net income.

Covered by free cash flow

Dividends take 26.9% of free cash flow.