Intrinsic Value Applied Materials, Inc. (0R1A.L)

• Previous Close: £336.25
• Intrinsic Value: £78.55
• Upside potential: -77%

Stock Valuation Context

Business Model And Market Position

Applied Materials, Inc. is a global leader in providing advanced manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company operates through three key segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. Its Semiconductor Systems segment is pivotal, offering cutting-edge technologies like epitaxy, ion implantation, and chemical vapor deposition, which are essential for semiconductor fabrication. The Applied Global Services segment enhances equipment performance and productivity through integrated solutions, while the Display and Adjacent Markets segment caters to the growing demand for advanced display technologies in consumer electronics. Applied Materials holds a dominant position in the semiconductor equipment market, driven by its technological innovation and extensive global footprint. The company serves major semiconductor manufacturers and display producers, benefiting from the secular growth in AI, IoT, and 5G-driven demand for chips. Its strong R&D focus and strategic partnerships reinforce its competitive edge in a highly specialized and capital-intensive industry.

Revenue Profitability And Efficiency

In FY 2023, Applied Materials reported revenue of $26.52 billion, with net income reaching $6.86 billion, reflecting robust profitability. The company's operating cash flow stood at $8.7 billion, underscoring strong cash generation capabilities. Capital expenditures were $1.11 billion, indicating disciplined investment in growth and innovation. The diluted EPS of $8.11 highlights efficient earnings delivery to shareholders.

Earnings Power And Capital Efficiency

Applied Materials demonstrates significant earnings power, with a net income margin of approximately 25.9% in FY 2023. The company's ability to convert revenue into profits is supported by its high-margin services and equipment sales. Capital efficiency is evident in its operating cash flow, which comfortably covers capital expenditures and supports shareholder returns.

Balance Sheet And Financial Health

The company maintains a solid balance sheet, with $6.13 billion in cash and equivalents and total debt of $5.81 billion, reflecting a prudent leverage profile. Its strong liquidity position and manageable debt levels provide flexibility for strategic investments and operational needs.

Growth Trends And Dividend Policy

Applied Materials has shown consistent growth, driven by demand for semiconductor and display technologies. The company paid a dividend of $0.86 per share in FY 2023, signaling a commitment to returning capital to shareholders. Its growth trajectory is supported by secular trends in AI, IoT, and advanced display markets.

Valuation And Market Expectations

With a market capitalization of approximately $83.85 billion and a beta of 1.705, Applied Materials is valued as a high-growth player in the semiconductor equipment sector. The market expects continued outperformance, given its technological leadership and exposure to key industry trends.

Strategic Advantages And Outlook

Applied Materials' strategic advantages include its technological leadership, diversified product portfolio, and global customer base. The outlook remains positive, supported by strong demand for semiconductor equipment and services, driven by advancements in AI, 5G, and consumer electronics. The company is well-positioned to capitalize on long-term industry growth.

Sources

Company filings, Bloomberg