APPLIED MATERIALS INC (NASDAQ:AMAT) – A Strong Contender for Quality Investors

APPLIED MATERIALS INC (NASDAQ:AMAT) stands out as a compelling candidate for quality investors, meeting stringent criteria for profitability, financial health, and growth. The company, a leader in semiconductor manufacturing equipment, demonstrates strong fundamentals that align with the principles of quality investing.

Key Strengths

• High Return on Invested Capital (ROIC): AMAT’s ROIC (excluding cash and goodwill) is an impressive 46.97%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong Profitability: The company’s EBIT growth over the past five years (18.52%) outpaces its revenue growth (7.18%), reflecting improving operational efficiency and pricing power.
• Healthy Debt Position: With a Debt-to-Free Cash Flow ratio of 1.07, AMAT could theoretically repay all its debt in just over a year using current cash flows, signaling strong solvency.
• Profit Quality: AMAT converts 92.06% of net income into free cash flow, demonstrating high earnings quality and effective cash generation.

Growth and Valuation

AMAT has delivered consistent revenue and earnings growth, with analysts forecasting further expansion. While its P/E ratio of 20.68 suggests a premium valuation, it remains more attractive than many industry peers. The company’s solid fundamentals justify its valuation for long-term investors.

Our Caviar Cruise screener lists more quality stocks meeting these criteria. For a deeper dive, review the full fundamental analysis of AMAT.

Disclaimer

This is not investing advice. The observations here are based on current data, but investors should conduct their own research before making decisions.