Applied Materials (AMAT:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Applied Materials(AMAT:NAS)

Technology:Semiconductor Equipment & Materials

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$32.67 (USD) 17/12/2018

Weighted Valuation
$45.56 (USD)

Overall Rating
Undervalued by 39.4%

Valuation Models Analyst Consensus: $50.33 (USD)
(in order of importance) Discounted Cash Flow: $42.27 (USD)
Comparables: $37.79 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Fairly valued on an Asset Valuation

Company Overview (AMAT:NAS USD)

Price 32.67
Range 32.52 – 33.76
52 week 31.12 – 61.61
Open 32.52
Vol / Avg. 11.99M/13.21M
Mkt cap 31.32B
P/E 11.98
Div/yield 0.60/0.02
EPS 3.23
Shares 958.61M
Beta 1.64

Company Description

Applied Materials Inc is one of the world’s largest suppliers of semiconductor manufacturing equipment, providing materials engineering solutions to help make nearly every chip in the world. The firm’s systems are used in every process step with the exception of lithography. Key tools include those for chemical and physical vapor deposition, etching, chemical mechanical polishing, wafer- and reticle-inspection, critical dimension measurement, and defect-inspection scanning electron microscopes.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for AMAT:NAS

Using a discounted cash flow model we generated an intrinsic value of $42.27 (USD) for AMAT:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

AMAT:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $42.27 1% 5% 1% 5%
WACC (or Ke) 10.35 $49.49 $36.78
Terminal Growth Rate 3.00 $37.47 $48.59
Tax Rate 0.29 $45.72 $38.83
Cash Flow 5,317,375,000 $39.84 $44.71
Capital Expenditures 5,000,000 $42.28 $42.27
Long Term Debt 3,343,000,000 $42.45 $42.10

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $37.79 (USD) for AMAT:NAS. We also generated a valuation of $31.25 (USD) using other metrics and comparables.
The comparable companies were KLA-Tencor (KLAC:NAS) and Lam Research (LRCX:NAS).

Company AMAT:NAS End Date Value
Earnings/Share $3.23 (USD)
Book Value/Share $7.06 (USD)
Sales/Share $16.42 (USD)
Cash Flow/Share $3.09 (USD)
EBITDA/Share $5.25 (USD)
Price Based on Comps Adjustment Factor (%)
$46.38 (USD) -2.5
$50.12 (USD) 18.6
$51.29 (USD) -9.9
$25.94 (USD) -6.5
$39.65 (USD) -86.2
AMAT:NAS Ratios Used Average Values KLAC:NAS LRCX:NAS
11.44 PE Ratio 14.36 16.82 11.90
5.28 PB Ratio 7.10 9.63 4.58
2.27 PS Ratio 3.12 3.72 2.53
12.06 PCF Ratio 11.74 12.51 10.98
6.87 EV to EBITDA 7.55 8.45 6.66

Multiples

Using a multiples approach we generated a valuation of  $52.91 (USD) for AMAT:NAS

Company AMAT:NAS End Date Value
Earnings/Share $3.23 (USD)
Book Value/Share $7.06 (USD)
Sales/Share $16.42 (USD)
Cash Flow/Share $3.09 (USD)
EBITDA/Share $5.25 (USD)
Price Based on Comps Adjustment Factor
$62.95 (USD) 0
$32.68 (USD) 0
$52.77 (USD) 0
$49.47 (USD) 0
$66.66 (USD) 0
Ratios Ratio Average
PE Ratio 19.49
PB Ratio 4.63
PS Ratio 3.21
PCF Ratio 16.01
EV to EBITDA 12.70

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  AMAT:NAS for the last 10 years was  4.48

We ran the Adjusted Book Value for  AMAT:NAS and generated a book value of  $7.07 (USD)
By multiplying these we get an adjusted valuation of  $31.67 (USD)

Analyst Data

In the Stockcalc database there are 6 analysts that provide a valuation for AMAT:NAS. The 6 analysts have a concensus valuation for AMAT:NAS for 2019 of $50.33 (USD).

AMAT:NAS Applied Materials

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
5 3 0 4.2222 Outperform 2018-12-14

Current Price: 32.67 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 3.84 4.64 2.79
# EPS Analysts 6 5 2
Mean Revenue 15,918.40 17,594.70 17,589.50
# Revenue Analysts 5 3 1
Mean Target Price 50.33
Mean Cash Flow 4.28 4.68 5.15
Mean EBITDA 4,606.70 5,158.50 5,162.50
Mean Net Income 3,629.30 4,355.40 4,227.50
Mean Debt Outstanding 2,505.00 3,234.10
Mean Tax Rate 11.70 12.00
Mean Growth Rate 6.93
Mean Capital Expenditure 386.50 328.70 260.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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