Applied Materials AMAT
What does Applied Materials do?
Applied Materials develops and manufactures equipment, services and software for semiconductor production and related industries. Its offering includes systems for key manufacturing steps such as deposition, etching, thermal processes, chemical-mechanical planarization, ion implantation, and metrology and inspection technology. Customers include major chipmakers, memory producers and foundries worldwide, including significant customers in Asia.
The company reports in two segments. Semiconductor Systems sells manufacturing equipment and generates the larger part of the business. Applied Global Services supplies spare parts, upgrades, maintenance and factory automation for installed equipment and provides recurring, less cyclical revenue. In terms of competitive position, Applied Materials is one of the largest equipment suppliers in the industry, with particular strength in deposition and materials engineering. The most important competitors include Lam Research, Tokyo Electron and ASML, which compete or complement to varying degrees depending on the process step.
Score profile
Rank vs. Semiconductor Equipment & Materials (24 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Applied Materials ranks above average in the group Semiconductor Equipment & Materials (7.5/10). On growth, the company ranks in the middle in the group Semiconductor Equipment & Materials (4.8/10). On valuation (higher = cheaper), the stock ranks in the middle in the group Semiconductor Equipment & Materials (4.6/10). On financial strength, Applied Materials ranks below average in the group Semiconductor Equipment & Materials (3.5/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 20.1x | 20.1x | better than 52 % |
| Trailing P/E | 32.2x | 37.3x | better than 66 % |
| PEG ratio | 0.7x | 1.2x | better than 76 % |
| EV/EBITDA | 28.8x | 25.3x | better than 34 % |
| Price/sales | 9.6x | 5.3x | better than 23 % |
| Price/book | 11.5x | 3.5x | better than 15 % |
| Revenue growth | 24.8% | 28.6% | better than 40 % |
| Earnings growth | 42.8% | 38.9% | better than 56 % |
| Gross margin | 49.4% | 46.9% | better than 60 % |
| Operating margin | 33.7% | 20.9% | better than 81 % |
| Net margin | 30.1% | 11.3% | better than 81 % |
| Return on equity | 41.1% | 9.7% | better than 77 % |
| Debt/equity | 28.7% | 28.5% | better than 48 % |
| Current ratio | 2.4x | 3.3x | better than 23 % |
| Free cash flow yield | 1.0% | 1.4% | better than 35 % |
| Dividend yield | 0.6% | 0.6% | – |
| Payout ratio | 16.5% | 16.5% | – |
| Beta | 1.67 | 1.70 | – |
Valuation: what is Applied Materials worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Applied Materials a model range of 328.10 USD to 373.07 USD per share.
37 analysts, average rating “Strong buy”, average price target 620.78 USD (+66.6%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Chipmakers' willingness to invest in new fabs and capacity expansions largely determines demand for manufacturing equipment.
- Technology transitions such as new chip architectures, advanced packaging and new materials increase the need for specialized process equipment.
- The growing installed equipment base supports the service business in spare parts, maintenance and upgrades.
Risks
- The semiconductor industry is highly cyclical, so investment cuts by customers can noticeably weigh on revenue and earnings.
- Export controls and geopolitical tensions, particularly in relation to China, can restrict sales markets and disrupt supply chains.
- High customer concentration and intense technology competition can put pressure on prices, market share and margins.
What to look for with Applied Materials
The order backlog relative to revenue is revealing, as it serves as a leading indicator of capacity utilization in a cyclical equipment business.