Intrinsic value of Applied Materials - AMAT

Previous Close

$33.64

  Intrinsic Value

$284.42

stock screener

  Rating & Target

str. buy

+745%

Previous close

$33.64

 
Intrinsic value

$284.42

 
Up/down potential

+745%

 
Rating

str. buy

We calculate the intrinsic value of AMAT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 33.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  28.80
  26.42
  24.28
  22.35
  20.62
  19.05
  17.65
  16.38
  15.25
  14.22
  13.30
  12.47
  11.72
  11.05
  10.44
  9.90
  9.41
  8.97
  8.57
  8.22
  7.89
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.25
  6.12
Revenue, $m
  18,724
  23,670
  29,417
  35,992
  43,412
  51,683
  60,805
  70,766
  81,555
  93,152
  105,540
  118,700
  132,614
  147,267
  162,648
  178,751
  195,572
  213,113
  231,382
  250,390
  270,154
  290,697
  312,045
  334,230
  357,286
  381,255
  406,181
  432,111
  459,099
  487,200
Variable operating expenses, $m
  9,964
  12,497
  15,440
  18,806
  22,605
  26,840
  31,510
  36,610
  42,134
  48,072
  54,036
  60,774
  67,898
  75,400
  83,276
  91,520
  100,132
  109,113
  118,467
  128,199
  138,318
  148,836
  159,766
  171,125
  182,930
  195,202
  207,963
  221,240
  235,057
  249,445
Fixed operating expenses, $m
  2,979
  3,045
  3,112
  3,180
  3,250
  3,322
  3,395
  3,469
  3,546
  3,624
  3,703
  3,785
  3,868
  3,953
  4,040
  4,129
  4,220
  4,313
  4,408
  4,505
  4,604
  4,705
  4,808
  4,914
  5,022
  5,133
  5,246
  5,361
  5,479
  5,600
Total operating expenses, $m
  12,943
  15,542
  18,552
  21,986
  25,855
  30,162
  34,905
  40,079
  45,680
  51,696
  57,739
  64,559
  71,766
  79,353
  87,316
  95,649
  104,352
  113,426
  122,875
  132,704
  142,922
  153,541
  164,574
  176,039
  187,952
  200,335
  213,209
  226,601
  240,536
  255,045
Operating income, $m
  5,780
  8,129
  10,866
  14,006
  17,557
  21,522
  25,900
  30,687
  35,875
  41,457
  47,801
  54,141
  60,848
  67,913
  75,333
  83,102
  91,220
  99,687
  108,507
  117,686
  127,232
  137,156
  147,470
  158,191
  169,334
  180,921
  192,971
  205,510
  218,562
  232,155
EBITDA, $m
  6,474
  8,906
  11,741
  14,992
  18,668
  22,773
  27,305
  32,260
  37,631
  43,408
  49,583
  56,146
  63,088
  70,401
  78,080
  86,121
  94,523
  103,287
  112,415
  121,915
  131,795
  142,066
  152,741
  163,836
  175,369
  187,360
  199,832
  212,809
  226,317
  240,385
Interest expense (income), $m
  186
  286
  443
  628
  843
  1,088
  1,366
  1,675
  2,016
  2,389
  2,792
  3,226
  3,689
  4,181
  4,701
  5,249
  5,824
  6,426
  7,055
  7,711
  8,394
  9,105
  9,844
  10,612
  11,410
  12,239
  13,101
  13,997
  14,929
  15,899
  16,908
Earnings before tax, $m
  5,494
  7,686
  10,238
  13,164
  16,469
  20,156
  24,225
  28,671
  33,487
  38,665
  44,575
  50,452
  56,667
  63,212
  70,084
  77,278
  84,794
  92,632
  100,796
  109,292
  118,128
  127,312
  136,859
  146,781
  157,095
  167,819
  178,974
  190,581
  202,663
  215,247
Tax expense, $m
  1,483
  2,075
  2,764
  3,554
  4,447
  5,442
  6,541
  7,741
  9,041
  10,440
  12,035
  13,622
  15,300
  17,067
  18,923
  20,865
  22,894
  25,011
  27,215
  29,509
  31,894
  34,374
  36,952
  39,631
  42,416
  45,311
  48,323
  51,457
  54,719
  58,117
Net income, $m
  4,010
  5,611
  7,474
  9,609
  12,022
  14,714
  17,684
  20,930
  24,445
  28,225
  32,540
  36,830
  41,367
  46,145
  51,161
  56,413
  61,899
  67,621
  73,581
  79,783
  86,233
  92,938
  99,907
  107,150
  114,679
  122,508
  130,651
  139,124
  147,944
  157,131

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  20,944
  26,477
  32,905
  40,259
  48,559
  57,811
  68,014
  79,157
  91,225
  104,197
  118,054
  132,774
  148,337
  164,728
  181,933
  199,945
  218,760
  238,381
  258,816
  280,078
  302,186
  325,165
  349,044
  373,859
  399,649
  426,460
  454,341
  483,346
  513,534
  544,967
Adjusted assets (=assets-cash), $m
  20,944
  26,477
  32,905
  40,259
  48,559
  57,811
  68,014
  79,157
  91,225
  104,197
  118,054
  132,774
  148,337
  164,728
  181,933
  199,945
  218,760
  238,381
  258,816
  280,078
  302,186
  325,165
  349,044
  373,859
  399,649
  426,460
  454,341
  483,346
  513,534
  544,967
Revenue / Adjusted assets
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
  0.894
Average production assets, $m
  3,763
  4,758
  5,913
  7,234
  8,726
  10,388
  12,222
  14,224
  16,393
  18,724
  21,214
  23,859
  26,655
  29,601
  32,692
  35,929
  39,310
  42,836
  46,508
  50,328
  54,301
  58,430
  62,721
  67,180
  71,815
  76,632
  81,642
  86,854
  92,279
  97,927
Working capital, $m
  1,966
  2,485
  3,089
  3,779
  4,558
  5,427
  6,384
  7,430
  8,563
  9,781
  11,082
  12,463
  13,924
  15,463
  17,078
  18,769
  20,535
  22,377
  24,295
  26,291
  28,366
  30,523
  32,765
  35,094
  37,515
  40,032
  42,649
  45,372
  48,205
  51,156
Total debt, $m
  8,198
  11,623
  15,602
  20,155
  25,292
  31,019
  37,335
  44,232
  51,702
  59,732
  68,309
  77,421
  87,055
  97,201
  107,851
  119,000
  130,647
  142,792
  155,441
  168,602
  182,287
  196,511
  211,292
  226,653
  242,617
  259,213
  276,471
  294,425
  313,111
  332,569
Total liabilities, $m
  12,964
  16,389
  20,368
  24,921
  30,058
  35,785
  42,101
  48,998
  56,468
  64,498
  73,075
  82,187
  91,821
  101,967
  112,617
  123,766
  135,413
  147,558
  160,207
  173,368
  187,053
  201,277
  216,058
  231,419
  247,383
  263,979
  281,237
  299,191
  317,877
  337,335
Total equity, $m
  7,980
  10,088
  12,537
  15,339
  18,501
  22,026
  25,913
  30,159
  34,757
  39,699
  44,979
  50,587
  56,517
  62,761
  69,317
  76,179
  83,348
  90,823
  98,609
  106,710
  115,133
  123,888
  132,986
  142,440
  152,266
  162,481
  173,104
  184,155
  195,656
  207,632
Total liabilities and equity, $m
  20,944
  26,477
  32,905
  40,260
  48,559
  57,811
  68,014
  79,157
  91,225
  104,197
  118,054
  132,774
  148,338
  164,728
  181,934
  199,945
  218,761
  238,381
  258,816
  280,078
  302,186
  325,165
  349,044
  373,859
  399,649
  426,460
  454,341
  483,346
  513,533
  544,967
Debt-to-equity ratio
  1.030
  1.150
  1.240
  1.310
  1.370
  1.410
  1.440
  1.470
  1.490
  1.500
  1.520
  1.530
  1.540
  1.550
  1.560
  1.560
  1.570
  1.570
  1.580
  1.580
  1.580
  1.590
  1.590
  1.590
  1.590
  1.600
  1.600
  1.600
  1.600
  1.600
Adjusted equity ratio
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,010
  5,611
  7,474
  9,609
  12,022
  14,714
  17,684
  20,930
  24,445
  28,225
  32,540
  36,830
  41,367
  46,145
  51,161
  56,413
  61,899
  67,621
  73,581
  79,783
  86,233
  92,938
  99,907
  107,150
  114,679
  122,508
  130,651
  139,124
  147,944
  157,131
Depreciation, amort., depletion, $m
  694
  778
  875
  986
  1,111
  1,251
  1,405
  1,573
  1,756
  1,951
  1,783
  2,005
  2,240
  2,487
  2,747
  3,019
  3,303
  3,600
  3,908
  4,229
  4,563
  4,910
  5,271
  5,645
  6,035
  6,440
  6,861
  7,299
  7,755
  8,229
Funds from operations, $m
  4,705
  6,388
  8,349
  10,595
  13,133
  15,965
  19,089
  22,503
  26,201
  30,177
  34,322
  38,835
  43,607
  48,633
  53,908
  59,432
  65,203
  71,221
  77,490
  84,013
  90,796
  97,848
  105,178
  112,795
  120,714
  128,948
  137,512
  146,423
  155,699
  165,360
Change in working capital, $m
  440
  519
  603
  690
  779
  869
  958
  1,046
  1,133
  1,218
  1,301
  1,382
  1,461
  1,539
  1,615
  1,691
  1,766
  1,842
  1,918
  1,996
  2,075
  2,157
  2,242
  2,329
  2,421
  2,517
  2,617
  2,723
  2,834
  2,951
Cash from operations, $m
  4,265
  5,869
  7,745
  9,905
  12,354
  15,097
  18,132
  21,457
  25,068
  28,959
  33,022
  37,453
  42,146
  47,094
  52,293
  57,741
  63,437
  69,379
  75,571
  82,017
  88,721
  95,691
  102,936
  110,466
  118,293
  126,431
  134,895
  143,700
  152,865
  162,409
Maintenance CAPEX, $m
  -245
  -316
  -400
  -497
  -608
  -733
  -873
  -1,027
  -1,195
  -1,378
  -1,573
  -1,783
  -2,005
  -2,240
  -2,487
  -2,747
  -3,019
  -3,303
  -3,600
  -3,908
  -4,229
  -4,563
  -4,910
  -5,271
  -5,645
  -6,035
  -6,440
  -6,861
  -7,299
  -7,755
New CAPEX, $m
  -844
  -994
  -1,155
  -1,322
  -1,491
  -1,663
  -1,833
  -2,002
  -2,168
  -2,331
  -2,490
  -2,645
  -2,797
  -2,945
  -3,092
  -3,237
  -3,381
  -3,526
  -3,672
  -3,821
  -3,973
  -4,129
  -4,291
  -4,459
  -4,634
  -4,818
  -5,010
  -5,212
  -5,425
  -5,648
Cash from investing activities, $m
  -1,089
  -1,310
  -1,555
  -1,819
  -2,099
  -2,396
  -2,706
  -3,029
  -3,363
  -3,709
  -4,063
  -4,428
  -4,802
  -5,185
  -5,579
  -5,984
  -6,400
  -6,829
  -7,272
  -7,729
  -8,202
  -8,692
  -9,201
  -9,730
  -10,279
  -10,853
  -11,450
  -12,073
  -12,724
  -13,403
Free cash flow, $m
  3,176
  4,559
  6,191
  8,087
  10,255
  12,701
  15,425
  18,428
  21,704
  25,251
  28,958
  33,026
  37,344
  41,909
  46,714
  51,758
  57,036
  62,550
  68,300
  74,288
  80,519
  86,999
  93,735
  100,736
  108,014
  115,579
  123,445
  131,627
  140,142
  149,006
Issuance/(repayment) of debt, $m
  2,894
  3,425
  3,979
  4,552
  5,137
  5,727
  6,315
  6,898
  7,470
  8,030
  8,577
  9,112
  9,634
  10,146
  10,650
  11,149
  11,647
  12,145
  12,649
  13,161
  13,685
  14,224
  14,781
  15,360
  15,964
  16,596
  17,258
  17,954
  18,686
  19,457
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,894
  3,425
  3,979
  4,552
  5,137
  5,727
  6,315
  6,898
  7,470
  8,030
  8,577
  9,112
  9,634
  10,146
  10,650
  11,149
  11,647
  12,145
  12,649
  13,161
  13,685
  14,224
  14,781
  15,360
  15,964
  16,596
  17,258
  17,954
  18,686
  19,457
Total cash flow (excl. dividends), $m
  6,070
  7,984
  10,170
  12,639
  15,392
  18,428
  21,741
  25,325
  29,174
  33,281
  37,536
  42,137
  46,978
  52,055
  57,364
  62,907
  68,683
  74,695
  80,949
  87,449
  94,204
  101,223
  108,516
  116,097
  123,978
  132,174
  140,703
  149,581
  158,828
  168,463
Retained Cash Flow (-), $m
  -1,792
  -2,108
  -2,449
  -2,802
  -3,162
  -3,525
  -3,887
  -4,246
  -4,598
  -4,943
  -5,279
  -5,608
  -5,930
  -6,245
  -6,555
  -6,862
  -7,169
  -7,476
  -7,786
  -8,101
  -8,423
  -8,755
  -9,098
  -9,454
  -9,826
  -10,215
  -10,623
  -11,051
  -11,502
  -11,976
Prev. year cash balance distribution, $m
  3,161
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  7,439
  5,875
  7,720
  9,837
  12,230
  14,903
  17,854
  21,080
  24,576
  28,338
  32,256
  36,529
  41,048
  45,810
  50,809
  56,044
  61,514
  67,220
  73,163
  79,348
  85,781
  92,468
  99,418
  106,642
  114,152
  121,960
  130,080
  138,530
  147,327
  156,487
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  7,132
  5,379
  6,719
  8,100
  9,480
  10,816
  12,062
  13,175
  14,118
  14,857
  15,318
  15,588
  15,607
  15,379
  14,917
  14,242
  13,385
  12,379
  11,265
  10,083
  8,873
  7,672
  6,516
  5,432
  4,441
  3,558
  2,792
  2,143
  1,608
  1,178
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Applied Materials, Inc. provides manufacturing equipment, services and software to the global semiconductor, display and related industries. The Company's segments are Semiconductor Systems, which includes semiconductor capital equipment for etch, rapid thermal processing, deposition, chemical mechanical planarization, metrology and inspection, wafer packaging, and ion implantation; Applied Global Services, which provides integrated solutions to optimize equipment and fab performance and productivity; Display and Adjacent Markets, which includes products for manufacturing liquid crystal displays, organic light-emitting diodes, upgrades and roll-to-roll Web coating systems and other display technologies for televisions, personal computers, smart phones and other consumer-oriented devices, and Corporate and Other segment, which includes revenues from products, as well as costs of products sold for fabricating solar photovoltaic cells and modules, and certain operating expenses.

FINANCIAL RATIOS  of  Applied Materials (AMAT)

Valuation Ratios
P/E Ratio 10.4
Price to Sales 2.5
Price to Book 3.8
Price to Tangible Book
Price to Cash Flow 9.9
Price to Free Cash Flow 10.9
Growth Rates
Sales Growth Rate 34.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 36.4%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 56.7%
Total Debt to Equity 56.7%
Interest Coverage 21
Management Effectiveness
Return On Assets 21.2%
Ret/ On Assets - 3 Yr. Avg. 14.6%
Return On Total Capital 27.3%
Ret/ On T. Cap. - 3 Yr. Avg. 18.3%
Return On Equity 41.5%
Return On Equity - 3 Yr. Avg. 27.5%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 44.9%
Gross Margin - 3 Yr. Avg. 42.5%
EBITDA Margin 29.7%
EBITDA Margin - 3 Yr. Avg. 24.9%
Operating Margin 26.6%
Oper. Margin - 3 Yr. Avg. 21.3%
Pre-Tax Margin 25.7%
Pre-Tax Margin - 3 Yr. Avg. 20.3%
Net Profit Margin 23.6%
Net Profit Margin - 3 Yr. Avg. 17.9%
Effective Tax Rate 8%
Eff/ Tax Rate - 3 Yr. Avg. 12.1%
Payout Ratio 12.5%

AMAT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AMAT stock intrinsic value calculation we used $14537 million for the last fiscal year's total revenue generated by Applied Materials. The default revenue input number comes from 0001 income statement of Applied Materials. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AMAT stock valuation model: a) initial revenue growth rate of 28.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AMAT is calculated based on our internal credit rating of Applied Materials, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Applied Materials.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AMAT stock the variable cost ratio is equal to 53.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2915 million in the base year in the intrinsic value calculation for AMAT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Applied Materials.

Corporate tax rate of 27% is the nominal tax rate for Applied Materials. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AMAT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AMAT are equal to 20.1%.

Life of production assets of 11.9 years is the average useful life of capital assets used in Applied Materials operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AMAT is equal to 10.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $9349 million for Applied Materials - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 1008.05 million for Applied Materials is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Applied Materials at the current share price and the inputted number of shares is $33.9 billion.

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COMPANY NEWS

▶ Applied Materials Announces Cash Dividend   [Dec-07-18 07:30AM  GlobeNewswire]
▶ 3 Things Applied Materials Wants You to Know   [Dec-04-18 08:47PM  Motley Fool]
▶ [$$] China vulnerable in war with US over computer chips   [Dec-03-18 05:00AM  Financial Times]
▶ Why Applied Materials Stock Is Down 30% So Far in 2018   [Nov-20-18 09:31PM  Motley Fool]
▶ Is Applied Materials Stock Poised to Drop Further?   [Nov-19-18 10:49AM  InvestorPlace]
▶ The chip slowdown is real, but how bad will it be?   [Nov-18-18 10:33AM  MarketWatch]
▶ Stock Market Today: End-of-Week Jitters   [05:04PM  Investopedia]
▶ Dow Leads The Stock Market Today As These 5 Big Caps Rally   [04:25PM  Investor's Business Daily]
▶ 3 Stocks Fall Friday   [12:55PM  GuruFocus.com]
▶ Applied Materials Sinks on Earnings Miss   [09:46AM  TheStreet.com]
▶ Company News For Nov 16, 2018   [09:30AM  Zacks]
▶ [$$] Stocks to Watch: Viacom, PG&E, Nvidia, Nordstrom   [09:03AM  The Wall Street Journal]
▶ Day Ahead: Top 3 Things to Watch   [05:45PM  Investing.com]
▶ Applied Materials: Fiscal 4Q Earnings Snapshot   [04:18PM  Associated Press]
▶ Applied Materials to invest $600 million at SUNY Poly campus in Albany   [12:18PM  American City Business Journals]
▶ Brexit Blues and Fed Follies: Market Recon   [07:13AM  TheStreet.com]
▶ 3 signs bears are poised to devour the stock market bulls   [Nov-13-18 12:25PM  Yahoo Finance Video]
▶ Who are the highest-paid CFOs in the Bay Area?   [Nov-12-18 05:19PM  American City Business Journals]
▶ Applied Materials Announces Q4 and FY2018 Earnings Webcast   [Nov-01-18 07:30AM  GlobeNewswire]
▶ Applied Materials Is Still a Buy   [12:51PM  GuruFocus.com]
▶ These stocks may be sacrificed in a cold war with China   [Oct-22-18 07:20PM  CNBC Videos]
▶ Goldman Sachs Has It Right on Chip Stocks and Nvidia   [Oct-19-18 01:09PM  InvestorPlace]
▶ Applied Materials Keeps Rising on Wednesday   [Oct-17-18 05:29PM  TheStreet.com]

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