Intrinsic value of Applied Materials - AMAT

Previous Close

$57.46

  Intrinsic Value

$182.04

stock screener

  Rating & Target

str. buy

+217%

Previous close

$57.46

 
Intrinsic value

$182.04

 
Up/down potential

+217%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  34.29
  20.40
  18.86
  17.47
  16.23
  15.10
  14.09
  13.18
  12.37
  11.63
  10.97
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
  7.31
  7.08
  6.87
  6.69
  6.52
  6.36
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
Revenue, $m
  14,537
  17,503
  20,804
  24,439
  28,404
  32,694
  37,302
  42,220
  47,441
  52,958
  58,766
  64,860
  71,237
  77,897
  84,841
  92,072
  99,595
  107,417
  115,547
  123,995
  132,774
  141,899
  151,385
  161,250
  171,513
  182,196
  193,320
  204,910
  216,990
  229,588
  242,733
Variable operating expenses, $m
 
  9,348
  11,047
  12,919
  14,960
  17,169
  19,541
  22,073
  24,761
  27,601
  30,591
  33,392
  36,675
  40,104
  43,679
  47,402
  51,275
  55,302
  59,487
  63,837
  68,356
  73,054
  77,938
  83,017
  88,300
  93,800
  99,527
  105,494
  111,713
  118,199
  124,967
Fixed operating expenses, $m
 
  2,996
  3,071
  3,148
  3,226
  3,307
  3,390
  3,475
  3,561
  3,650
  3,742
  3,835
  3,931
  4,029
  4,130
  4,233
  4,339
  4,448
  4,559
  4,673
  4,790
  4,909
  5,032
  5,158
  5,287
  5,419
  5,555
  5,693
  5,836
  5,982
  6,131
Total operating expenses, $m
  10,669
  12,344
  14,118
  16,067
  18,186
  20,476
  22,931
  25,548
  28,322
  31,251
  34,333
  37,227
  40,606
  44,133
  47,809
  51,635
  55,614
  59,750
  64,046
  68,510
  73,146
  77,963
  82,970
  88,175
  93,587
  99,219
  105,082
  111,187
  117,549
  124,181
  131,098
Operating income, $m
  3,868
  5,159
  6,685
  8,372
  10,218
  12,218
  14,371
  16,673
  19,119
  21,706
  24,433
  27,633
  30,631
  33,764
  37,032
  40,437
  43,981
  47,668
  51,501
  55,486
  59,628
  63,935
  68,415
  73,075
  77,926
  82,977
  88,238
  93,722
  99,441
  105,407
  111,635
EBITDA, $m
  4,275
  5,647
  7,202
  8,921
  10,800
  12,838
  15,031
  17,375
  19,866
  22,502
  25,278
  28,194
  31,247
  34,438
  37,767
  41,234
  44,843
  48,598
  52,501
  56,559
  60,777
  65,164
  69,725
  74,471
  79,410
  84,554
  89,911
  95,496
  101,319
  107,395
  113,736
Interest expense (income), $m
  186
  228
  316
  415
  523
  641
  769
  906
  1,052
  1,208
  1,372
  1,545
  1,727
  1,917
  2,115
  2,322
  2,537
  2,761
  2,994
  3,236
  3,488
  3,749
  4,021
  4,303
  4,597
  4,903
  5,221
  5,552
  5,897
  6,257
  6,632
Earnings before tax, $m
  3,731
  4,931
  6,369
  7,958
  9,695
  11,577
  13,603
  15,767
  18,066
  20,499
  23,061
  26,087
  28,904
  31,847
  34,917
  38,116
  41,444
  44,907
  48,507
  52,250
  56,141
  60,186
  64,394
  68,772
  73,329
  78,074
  83,017
  88,170
  93,544
  99,150
  105,003
Tax expense, $m
  297
  1,331
  1,720
  2,149
  2,618
  3,126
  3,673
  4,257
  4,878
  5,535
  6,226
  7,044
  7,804
  8,599
  9,428
  10,291
  11,190
  12,125
  13,097
  14,107
  15,158
  16,250
  17,386
  18,568
  19,799
  21,080
  22,415
  23,806
  25,257
  26,771
  28,351
Net income, $m
  3,434
  3,599
  4,649
  5,809
  7,077
  8,452
  9,930
  11,510
  13,188
  14,964
  16,834
  19,044
  21,100
  23,249
  25,490
  27,824
  30,254
  32,782
  35,410
  38,142
  40,983
  43,936
  47,008
  50,204
  53,530
  56,994
  60,603
  64,364
  68,287
  72,380
  76,652

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  7,276
  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
  19,419
  14,622
  17,380
  20,417
  23,730
  27,314
  31,163
  35,272
  39,633
  44,242
  49,094
  54,185
  59,513
  65,077
  70,878
  76,919
  83,204
  89,739
  96,530
  103,588
  110,923
  118,545
  126,470
  134,712
  143,286
  152,210
  161,504
  171,186
  181,278
  191,803
  202,785
Adjusted assets (=assets-cash), $m
  12,143
  14,622
  17,380
  20,417
  23,730
  27,314
  31,163
  35,272
  39,633
  44,242
  49,094
  54,185
  59,513
  65,077
  70,878
  76,919
  83,204
  89,739
  96,530
  103,588
  110,923
  118,545
  126,470
  134,712
  143,286
  152,210
  161,504
  171,186
  181,278
  191,803
  202,785
Revenue / Adjusted assets
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
  1.197
Average production assets, $m
  1,495
  1,803
  2,143
  2,517
  2,926
  3,368
  3,842
  4,349
  4,886
  5,455
  6,053
  6,681
  7,337
  8,023
  8,739
  9,483
  10,258
  11,064
  11,901
  12,771
  13,676
  14,616
  15,593
  16,609
  17,666
  18,766
  19,912
  21,106
  22,350
  23,648
  25,002
Working capital, $m
  8,803
  1,838
  2,184
  2,566
  2,982
  3,433
  3,917
  4,433
  4,981
  5,561
  6,170
  6,810
  7,480
  8,179
  8,908
  9,668
  10,458
  11,279
  12,132
  13,019
  13,941
  14,899
  15,895
  16,931
  18,009
  19,131
  20,299
  21,516
  22,784
  24,107
  25,487
Total debt, $m
  5,304
  7,356
  9,642
  12,159
  14,906
  17,877
  21,068
  24,474
  28,090
  31,911
  35,933
  40,153
  44,570
  49,183
  53,992
  59,000
  64,210
  69,627
  75,258
  81,109
  87,189
  93,508
  100,078
  106,910
  114,018
  121,416
  129,121
  137,147
  145,514
  154,239
  163,342
Total liabilities, $m
  10,070
  12,122
  14,408
  16,925
  19,672
  22,643
  25,834
  29,240
  32,856
  36,677
  40,699
  44,919
  49,336
  53,949
  58,758
  63,766
  68,976
  74,393
  80,024
  85,875
  91,955
  98,274
  104,844
  111,676
  118,784
  126,182
  133,887
  141,913
  150,280
  159,005
  168,108
Total equity, $m
  9,349
  2,500
  2,972
  3,491
  4,058
  4,671
  5,329
  6,031
  6,777
  7,565
  8,395
  9,266
  10,177
  11,128
  12,120
  13,153
  14,228
  15,345
  16,507
  17,714
  18,968
  20,271
  21,626
  23,036
  24,502
  26,028
  27,617
  29,273
  30,999
  32,798
  34,676
Total liabilities and equity, $m
  19,419
  14,622
  17,380
  20,416
  23,730
  27,314
  31,163
  35,271
  39,633
  44,242
  49,094
  54,185
  59,513
  65,077
  70,878
  76,919
  83,204
  89,738
  96,531
  103,589
  110,923
  118,545
  126,470
  134,712
  143,286
  152,210
  161,504
  171,186
  181,279
  191,803
  202,784
Debt-to-equity ratio
  0.567
  2.940
  3.240
  3.480
  3.670
  3.830
  3.950
  4.060
  4.140
  4.220
  4.280
  4.330
  4.380
  4.420
  4.450
  4.490
  4.510
  4.540
  4.560
  4.580
  4.600
  4.610
  4.630
  4.640
  4.650
  4.660
  4.680
  4.690
  4.690
  4.700
  4.710
Adjusted equity ratio
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171
  0.171

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,434
  3,599
  4,649
  5,809
  7,077
  8,452
  9,930
  11,510
  13,188
  14,964
  16,834
  19,044
  21,100
  23,249
  25,490
  27,824
  30,254
  32,782
  35,410
  38,142
  40,983
  43,936
  47,008
  50,204
  53,530
  56,994
  60,603
  64,364
  68,287
  72,380
  76,652
Depreciation, amort., depletion, $m
  407
  488
  517
  548
  583
  620
  660
  702
  747
  795
  845
  561
  617
  674
  734
  797
  862
  930
  1,000
  1,073
  1,149
  1,228
  1,310
  1,396
  1,485
  1,577
  1,673
  1,774
  1,878
  1,987
  2,101
Funds from operations, $m
  3,232
  4,088
  5,166
  6,357
  7,660
  9,071
  10,590
  12,212
  13,936
  15,759
  17,680
  19,605
  21,717
  23,923
  26,224
  28,621
  31,116
  33,712
  36,410
  39,215
  42,132
  45,164
  48,318
  51,599
  55,015
  58,571
  62,276
  66,138
  70,165
  74,367
  78,753
Change in working capital, $m
  -377
  311
  347
  382
  416
  450
  484
  516
  548
  579
  610
  640
  670
  699
  729
  759
  790
  821
  854
  887
  922
  958
  996
  1,036
  1,078
  1,122
  1,168
  1,217
  1,268
  1,323
  1,380
Cash from operations, $m
  3,609
  3,776
  4,820
  5,976
  7,243
  8,621
  10,106
  11,696
  13,388
  15,180
  17,070
  18,965
  21,047
  23,223
  25,495
  27,862
  30,326
  32,890
  35,556
  38,328
  41,210
  44,206
  47,322
  50,563
  53,937
  57,449
  61,108
  64,921
  68,897
  73,044
  77,373
Maintenance CAPEX, $m
  0
  -126
  -151
  -180
  -212
  -246
  -283
  -323
  -365
  -411
  -458
  -509
  -561
  -617
  -674
  -734
  -797
  -862
  -930
  -1,000
  -1,073
  -1,149
  -1,228
  -1,310
  -1,396
  -1,485
  -1,577
  -1,673
  -1,774
  -1,878
  -1,987
New CAPEX, $m
  -345
  -308
  -340
  -374
  -408
  -442
  -475
  -507
  -538
  -568
  -598
  -628
  -657
  -686
  -715
  -745
  -775
  -806
  -837
  -870
  -904
  -940
  -977
  -1,016
  -1,057
  -1,100
  -1,146
  -1,194
  -1,244
  -1,298
  -1,354
Cash from investing activities, $m
  -2,526
  -434
  -491
  -554
  -620
  -688
  -758
  -830
  -903
  -979
  -1,056
  -1,137
  -1,218
  -1,303
  -1,389
  -1,479
  -1,572
  -1,668
  -1,767
  -1,870
  -1,977
  -2,089
  -2,205
  -2,326
  -2,453
  -2,585
  -2,723
  -2,867
  -3,018
  -3,176
  -3,341
Free cash flow, $m
  1,083
  3,343
  4,328
  5,421
  6,623
  7,933
  9,348
  10,866
  12,485
  14,201
  16,013
  17,829
  19,829
  21,921
  24,105
  26,383
  28,755
  31,223
  33,789
  36,458
  39,233
  42,117
  45,117
  48,237
  51,484
  54,864
  58,385
  62,054
  65,879
  69,868
  74,032
Issuance/(repayment) of debt, $m
  1,971
  2,052
  2,286
  2,518
  2,746
  2,971
  3,191
  3,406
  3,616
  3,821
  4,022
  4,220
  4,417
  4,613
  4,809
  5,008
  5,210
  5,417
  5,630
  5,851
  6,080
  6,319
  6,570
  6,832
  7,108
  7,398
  7,704
  8,027
  8,366
  8,725
  9,104
Issuance/(repurchase) of shares, $m
  -1,075
  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  
  951
  2,052
  2,286
  2,518
  2,746
  2,971
  3,191
  3,406
  3,616
  3,821
  4,022
  4,220
  4,417
  4,613
  4,809
  5,008
  5,210
  5,417
  5,630
  5,851
  6,080
  6,319
  6,570
  6,832
  7,108
  7,398
  7,704
  8,027
  8,366
  8,725
  9,104
Total cash flow (excl. dividends), $m
  2,034
  5,395
  6,614
  7,939
  9,370
  10,904
  12,539
  14,272
  16,100
  18,022
  20,035
  22,049
  24,246
  26,534
  28,915
  31,391
  33,965
  36,640
  39,420
  42,309
  45,313
  48,436
  51,686
  55,069
  58,592
  62,263
  66,089
  70,080
  74,245
  78,593
  83,135
Retained Cash Flow (-), $m
  -2,132
  -427
  -472
  -519
  -567
  -613
  -658
  -703
  -746
  -788
  -830
  -871
  -911
  -951
  -992
  -1,033
  -1,075
  -1,117
  -1,161
  -1,207
  -1,254
  -1,304
  -1,355
  -1,409
  -1,466
  -1,526
  -1,589
  -1,656
  -1,726
  -1,800
  -1,878
Prev. year cash balance distribution, $m
 
  7,276
  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
 
  12,243
  6,143
  7,420
  8,803
  10,291
  11,881
  13,570
  15,354
  17,234
  19,206
  21,179
  23,334
  25,582
  27,923
  30,358
  32,890
  35,522
  38,258
  41,102
  44,059
  47,133
  50,331
  53,660
  57,126
  60,737
  64,500
  68,425
  72,519
  76,794
  81,258
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
 
  11,738
  5,624
  6,457
  7,249
  7,977
  8,623
  9,167
  9,597
  9,900
  10,069
  10,058
  9,958
  9,727
  9,374
  8,913
  8,358
  7,729
  7,046
  6,329
  5,598
  4,875
  4,176
  3,517
  2,910
  2,363
  1,882
  1,469
  1,122
  838
  612
Current shareholders' claim on cash, %
  100
  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 17.7
Price to Sales 4.2
Price to Book 6.5
Price to Tangible Book
Price to Cash Flow 16.9
Price to Free Cash Flow 18.7
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 2017 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 20.4% 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 $2923 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 4.3% 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 10.3%.

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 1068.66 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 $61.4 billion.

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Financial statements of AMAT
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