Intrinsic value of Applied Materials - AMAT

Previous Close

$43.77

  Intrinsic Value

$367.23

stock screener

  Rating & Target

str. buy

+739%

Previous close

$43.77

 
Intrinsic value

$367.23

 
Up/down potential

+739%

 
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 2017), $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 47.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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, %
  34.30
  31.37
  28.73
  26.36
  24.22
  22.30
  20.57
  19.01
  17.61
  16.35
  15.22
  14.19
  13.28
  12.45
  11.70
  11.03
  10.43
  9.89
  9.40
  8.96
  8.56
  8.21
  7.89
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
Revenue, $m
  19,523
  25,648
  33,017
  41,720
  51,826
  63,384
  76,423
  90,954
  106,974
  124,466
  143,405
  163,760
  185,500
  208,590
  233,001
  258,708
  285,689
  313,933
  343,436
  374,201
  406,241
  439,577
  474,239
  510,267
  547,706
  586,612
  627,047
  669,083
  712,797
  758,274
Variable operating expenses, $m
  10,374
  13,510
  17,283
  21,739
  26,913
  32,831
  39,506
  46,946
  55,148
  64,104
  73,423
  83,845
  94,975
  106,798
  119,296
  132,458
  146,272
  160,733
  175,838
  191,590
  207,994
  225,062
  242,809
  261,255
  280,424
  300,344
  321,047
  342,569
  364,950
  388,234
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
  13,353
  16,555
  20,395
  24,919
  30,163
  36,153
  42,901
  50,415
  58,694
  67,728
  77,126
  87,630
  98,843
  110,751
  123,336
  136,587
  150,492
  165,046
  180,246
  196,095
  212,598
  229,767
  247,617
  266,169
  285,446
  305,477
  326,293
  347,930
  370,429
  393,834
Operating income, $m
  6,170
  9,093
  12,623
  16,801
  21,663
  27,232
  33,522
  40,539
  48,280
  56,738
  66,278
  76,131
  86,656
  97,839
  109,665
  122,121
  135,197
  148,888
  163,190
  178,107
  193,643
  209,810
  226,622
  244,097
  262,259
  281,135
  300,755
  321,153
  342,368
  364,440
EBITDA, $m
  7,198
  10,325
  14,100
  18,569
  23,767
  29,721
  36,445
  43,945
  52,220
  61,261
  71,054
  81,584
  92,833
  104,785
  117,424
  130,736
  144,711
  159,342
  174,627
  190,567
  207,171
  224,448
  242,414
  261,089
  280,498
  300,669
  321,636
  343,434
  366,104
  389,691
Interest expense (income), $m
  186
  286
  473
  702
  977
  1,303
  1,680
  2,113
  2,600
  3,143
  3,742
  4,396
  5,104
  5,866
  6,678
  7,542
  8,454
  9,416
  10,424
  11,480
  12,583
  13,734
  14,932
  16,178
  17,474
  18,821
  20,221
  21,676
  23,187
  24,759
  26,394
Earnings before tax, $m
  5,884
  8,621
  11,921
  15,824
  20,361
  25,552
  31,410
  37,939
  45,137
  52,996
  61,882
  71,026
  80,791
  91,161
  102,123
  113,666
  125,782
  138,463
  151,710
  165,523
  179,909
  194,878
  210,443
  226,623
  243,438
  260,914
  279,079
  297,966
  317,609
  338,046
Tax expense, $m
  1,589
  2,328
  3,219
  4,273
  5,497
  6,899
  8,481
  10,243
  12,187
  14,309
  16,708
  19,177
  21,814
  24,613
  27,573
  30,690
  33,961
  37,385
  40,962
  44,691
  48,575
  52,617
  56,820
  61,188
  65,728
  70,447
  75,351
  80,451
  85,754
  91,273
Net income, $m
  4,295
  6,293
  8,702
  11,552
  14,863
  18,653
  22,929
  27,695
  32,950
  38,687
  45,174
  51,849
  58,977
  66,548
  74,550
  82,977
  91,821
  101,078
  110,748
  120,832
  131,334
  142,261
  153,624
  165,435
  177,710
  190,467
  203,728
  217,515
  231,854
  246,774

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
  21,838
  28,689
  36,932
  46,667
  57,971
  70,900
  85,485
  101,739
  119,658
  139,223
  160,408
  183,177
  207,494
  233,322
  260,628
  289,382
  319,563
  351,156
  384,157
  418,570
  454,408
  491,697
  530,469
  570,768
  612,646
  656,165
  701,395
  748,415
  797,312
  848,181
Adjusted assets (=assets-cash), $m
  21,838
  28,689
  36,932
  46,667
  57,971
  70,900
  85,485
  101,739
  119,658
  139,223
  160,408
  183,177
  207,494
  233,322
  260,628
  289,382
  319,563
  351,156
  384,157
  418,570
  454,408
  491,697
  530,469
  570,768
  612,646
  656,165
  701,395
  748,415
  797,312
  848,181
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
  6,501
  8,541
  10,995
  13,893
  17,258
  21,107
  25,449
  30,288
  35,622
  41,447
  47,754
  54,532
  61,771
  69,461
  77,589
  86,150
  95,134
  104,540
  114,364
  124,609
  135,278
  146,379
  157,922
  169,919
  182,386
  195,342
  208,807
  222,805
  237,361
  252,505
Working capital, $m
  644
  846
  1,090
  1,377
  1,710
  2,092
  2,522
  3,001
  3,530
  4,107
  4,732
  5,404
  6,121
  6,883
  7,689
  8,537
  9,428
  10,360
  11,333
  12,349
  13,406
  14,506
  15,650
  16,839
  18,074
  19,358
  20,693
  22,080
  23,522
  25,023
Total debt, $m
  8,752
  12,992
  18,095
  24,121
  31,118
  39,121
  48,149
  58,210
  69,302
  81,413
  94,526
  108,621
  123,673
  139,661
  156,563
  174,361
  193,043
  212,600
  233,027
  254,329
  276,513
  299,594
  323,594
  348,539
  374,462
  401,400
  429,398
  458,503
  488,770
  520,258
Total liabilities, $m
  13,518
  17,758
  22,861
  28,887
  35,884
  43,887
  52,915
  62,976
  74,068
  86,179
  99,292
  113,387
  128,439
  144,427
  161,329
  179,127
  197,809
  217,366
  237,793
  259,095
  281,279
  304,360
  328,360
  353,305
  379,228
  406,166
  434,164
  463,269
  493,536
  525,024
Total equity, $m
  8,320
  10,930
  14,071
  17,780
  22,087
  27,013
  32,570
  38,762
  45,590
  53,044
  61,115
  69,791
  79,055
  88,896
  99,299
  110,255
  121,753
  133,790
  146,364
  159,475
  173,130
  187,337
  202,109
  217,463
  233,418
  249,999
  267,232
  285,146
  303,776
  323,157
Total liabilities and equity, $m
  21,838
  28,688
  36,932
  46,667
  57,971
  70,900
  85,485
  101,738
  119,658
  139,223
  160,407
  183,178
  207,494
  233,323
  260,628
  289,382
  319,562
  351,156
  384,157
  418,570
  454,409
  491,697
  530,469
  570,768
  612,646
  656,165
  701,396
  748,415
  797,312
  848,181
Debt-to-equity ratio
  1.050
  1.190
  1.290
  1.360
  1.410
  1.450
  1.480
  1.500
  1.520
  1.530
  1.550
  1.560
  1.560
  1.570
  1.580
  1.580
  1.590
  1.590
  1.590
  1.590
  1.600
  1.600
  1.600
  1.600
  1.600
  1.610
  1.610
  1.610
  1.610
  1.610
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
  4,295
  6,293
  8,702
  11,552
  14,863
  18,653
  22,929
  27,695
  32,950
  38,687
  45,174
  51,849
  58,977
  66,548
  74,550
  82,977
  91,821
  101,078
  110,748
  120,832
  131,334
  142,261
  153,624
  165,435
  177,710
  190,467
  203,728
  217,515
  231,854
  246,774
Depreciation, amort., depletion, $m
  1,028
  1,232
  1,477
  1,767
  2,104
  2,489
  2,923
  3,407
  3,940
  4,523
  4,775
  5,453
  6,177
  6,946
  7,759
  8,615
  9,513
  10,454
  11,436
  12,461
  13,528
  14,638
  15,792
  16,992
  18,239
  19,534
  20,881
  22,280
  23,736
  25,251
Funds from operations, $m
  5,323
  7,525
  10,180
  13,319
  16,967
  21,141
  25,852
  31,102
  36,890
  43,209
  49,949
  57,302
  65,154
  73,494
  82,309
  91,592
  101,334
  111,532
  122,185
  133,293
  144,862
  156,899
  169,416
  182,427
  195,949
  210,002
  224,609
  239,795
  255,590
  272,024
Change in working capital, $m
  165
  202
  243
  287
  334
  381
  430
  480
  529
  577
  625
  672
  717
  762
  806
  848
  890
  932
  974
  1,015
  1,057
  1,100
  1,144
  1,189
  1,235
  1,284
  1,334
  1,387
  1,443
  1,501
Cash from operations, $m
  5,159
  7,323
  9,937
  13,032
  16,634
  20,760
  25,422
  30,622
  36,361
  42,632
  49,324
  56,631
  64,437
  72,732
  81,503
  90,743
  100,444
  110,600
  121,211
  132,278
  143,804
  155,799
  168,272
  181,238
  194,713
  208,718
  223,274
  238,408
  254,148
  270,524
Maintenance CAPEX, $m
  -484
  -650
  -854
  -1,099
  -1,389
  -1,726
  -2,111
  -2,545
  -3,029
  -3,562
  -4,145
  -4,775
  -5,453
  -6,177
  -6,946
  -7,759
  -8,615
  -9,513
  -10,454
  -11,436
  -12,461
  -13,528
  -14,638
  -15,792
  -16,992
  -18,239
  -19,534
  -20,881
  -22,280
  -23,736
New CAPEX, $m
  -1,664
  -2,039
  -2,454
  -2,898
  -3,365
  -3,849
  -4,342
  -4,839
  -5,334
  -5,825
  -6,307
  -6,778
  -7,239
  -7,689
  -8,129
  -8,560
  -8,985
  -9,405
  -9,824
  -10,245
  -10,669
  -11,101
  -11,543
  -11,997
  -12,467
  -12,956
  -13,465
  -13,998
  -14,557
  -15,144
Cash from investing activities, $m
  -2,148
  -2,689
  -3,308
  -3,997
  -4,754
  -5,575
  -6,453
  -7,384
  -8,363
  -9,387
  -10,452
  -11,553
  -12,692
  -13,866
  -15,075
  -16,319
  -17,600
  -18,918
  -20,278
  -21,681
  -23,130
  -24,629
  -26,181
  -27,789
  -29,459
  -31,195
  -32,999
  -34,879
  -36,837
  -38,880
Free cash flow, $m
  3,011
  4,634
  6,629
  9,034
  11,879
  15,185
  18,969
  23,239
  27,998
  33,245
  38,873
  45,077
  51,745
  58,865
  66,429
  74,424
  82,844
  91,681
  100,933
  110,596
  120,674
  131,170
  142,092
  153,449
  165,254
  177,523
  190,275
  203,530
  217,311
  231,644
Issuance/(repayment) of debt, $m
  3,448
  4,241
  5,102
  6,026
  6,997
  8,003
  9,028
  10,061
  11,092
  12,111
  13,113
  14,094
  15,052
  15,988
  16,902
  17,799
  18,682
  19,556
  20,428
  21,301
  22,184
  23,082
  24,000
  24,945
  25,923
  26,938
  27,997
  29,105
  30,267
  31,488
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  
  3,448
  4,241
  5,102
  6,026
  6,997
  8,003
  9,028
  10,061
  11,092
  12,111
  13,113
  14,094
  15,052
  15,988
  16,902
  17,799
  18,682
  19,556
  20,428
  21,301
  22,184
  23,082
  24,000
  24,945
  25,923
  26,938
  27,997
  29,105
  30,267
  31,488
Total cash flow (excl. dividends), $m
  6,459
  8,874
  11,731
  15,060
  18,876
  23,188
  27,997
  33,300
  39,090
  45,356
  51,986
  59,171
  66,797
  74,853
  83,331
  92,223
  101,526
  111,238
  121,360
  131,898
  142,858
  154,252
  166,092
  178,394
  191,177
  204,462
  218,272
  232,635
  247,578
  263,132
Retained Cash Flow (-), $m
  -2,132
  -2,610
  -3,141
  -3,709
  -4,307
  -4,926
  -5,557
  -6,193
  -6,827
  -7,455
  -8,071
  -8,675
  -9,265
  -9,841
  -10,403
  -10,955
  -11,499
  -12,037
  -12,573
  -13,111
  -13,655
  -14,207
  -14,772
  -15,354
  -15,956
  -16,581
  -17,233
  -17,915
  -18,630
  -19,381
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
  160
  215
  282
  363
  459
  570
  697
  841
  1,000
  1,177
  1,369
  1,577
  1,801
  2,040
  2,294
  2,563
  2,846
  3,143
  3,453
  3,778
  4,116
  4,469
  4,835
  5,217
  5,613
  6,025
  6,453
  6,898
  7,360
  7,841
Cash available for distribution, $m
  7,487
  6,264
  8,590
  11,351
  14,569
  18,262
  22,440
  27,107
  32,263
  37,902
  43,915
  50,496
  57,532
  65,012
  72,927
  81,268
  90,027
  99,200
  108,787
  118,787
  129,204
  140,045
  151,319
  163,040
  175,221
  187,881
  201,040
  214,720
  228,948
  243,751
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
  7,179
  5,735
  7,476
  9,347
  11,293
  13,254
  15,160
  16,943
  18,533
  19,871
  20,855
  21,548
  21,875
  21,826
  21,410
  20,652
  19,588
  18,269
  16,750
  15,094
  13,364
  11,620
  9,918
  8,304
  6,816
  5,481
  4,315
  3,322
  2,499
  1,835
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 13.5
Price to Sales 3.2
Price to Book 5
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 14.2
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 34.3% 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 1.1%.

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 33.3%.

Life of production assets of 10 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 3.3%. 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 1073 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 $47.0 billion.

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COMPANY NEWS

▶ Nvidia Weighs On Chip Stock Plays, But Analysts Remain Upbeat   [02:57PM  Investor's Business Daily]
▶ Why Applied Materials Stock Is Sinking Today   [12:16PM  InvestorPlace]
▶ Jim Cramer: The Semis Give-Up   [10:26AM  TheStreet.com]
▶ Top 5 Things to Know in the Market on Friday   [09:20AM  Investing.com]
▶ Applied Materials: Fiscal 3Q Earnings Snapshot   [04:11PM  Associated Press]
▶ Stocks Advance On Planned Trade Talks; Nvidia Earnings On Deck   [10:23AM  Investor's Business Daily]
▶ Applied Materials Supplies Over 25% Upside   [Aug-13-18 09:51AM  Benzinga]
▶ Morgan Stanley Gets Cautious on Chip Stocks   [Aug-09-18 11:19AM  Investopedia]
▶ TSMC Cuts Outlook After Computer Virus; Applied Materials, Qualcomm Upgraded   [Aug-06-18 04:13PM  Investor's Business Daily]
▶ Applied Materials Announces Q3 FY2018 Earnings Webcast   [Aug-03-18 07:30AM  GlobeNewswire]
▶ Jim Cramer: Lam Research May Not Be Bottoming Yet   [Jul-31-18 07:01PM  TheStreet.com]
▶ Stocks - Micron Sinks Midday; Google Up Ahead of Earnings   [Jul-23-18 02:55PM  Investing.com]
▶ Applied Materials Bets Big on Cobalt   [Jul-22-18 06:07AM  Motley Fool]
▶ Better Buy: Lam Research vs. Applied Materials   [Jul-16-18 09:16PM  Motley Fool]
▶ 2 Chip Stocks With at Least 25% Upside   [06:00AM  Investopedia]
▶ 7 Strong Buy Stock Picks for Breakneck Growth   [Jul-11-18 03:46PM  Kiplinger]
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▶ 5 Triple-A Semicondcutor Stocks to Buy Now   [Jul-04-18 08:38AM  Kiplinger]
▶ Semiconductor Equipment Stocks Hit With Price-Target Cuts   [Jul-02-18 02:24PM  Investor's Business Daily]
▶ June Undervalued Stock Picks   [Jun-26-18 10:02AM  Simply Wall St.]
▶ 3 Chip Stocks Face Even Steeper Declines Ahead   [Jun-25-18 12:11PM  Investopedia]
▶ AI Design Forum Speaker Roster Announced   [07:30AM  GlobeNewswire]
▶ Applied Materials Inc (NASDAQ:AMAT): The Best Of Both Worlds   [Jun-19-18 06:05PM  Simply Wall St.]
▶ Two Top Chip-Gear Stocks Hit With Downgrades While One Upgraded   [Jun-13-18 04:39PM  Investor's Business Daily]
▶ Applied Materials Announces Cash Dividend   [Jun-07-18 04:05PM  GlobeNewswire]
▶ 20 Best S&P 500 Stocks to Buy for the Second Half   [Jun-06-18 03:53PM  InvestorPlace]
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