Applied Materials Inc (NASDAQ:AMAT) Identified as a High-Quality Stock by Caviar Cruise Screen

Applied Materials Inc (NASDAQ:AMAT) has been identified by the Caviar Cruise stock screening method, a structured process made to find companies with solid quality investing traits. This approach focuses on lasting business models, strong financial condition, and steady growth, traits that fit with long-term, buy-and-hold investment strategies. The screen assesses past performance, profitability, capital use, and financial steadiness, sorting for businesses that show not only temporary achievement but lasting operational strength.

Historical Growth and Profitability

A central idea of quality investing is the display of continued growth in both revenue and earnings. Applied Materials displays this with a 5-year revenue compound annual growth rate (CAGR) of 7.25%, easily above the screen’s 5% minimum. More notably, its EBIT growth over the same period is 18.52%, greatly exceeding revenue growth. This difference points to not only enlargement, but better operational effectiveness and possible pricing strength, important signs of a quality business. For investors, this implies the company is enlarging successfully and might have competitive benefits that let it turn higher revenues into even larger profits.

Return on Invested Capital

Applied Materials performs well in capital use, as shown by its return on invested capital excluding cash, goodwill, and intangibles (ROICexgc) of 47.29%. This measure is much higher than the screen’s 15% requirement and emphasizes the company’s capacity to produce large returns from its operational investments. A high ROIC is frequently linked with lasting competitive advantages and able management, both signs of quality companies. It shows that the company is not only enlarging but doing so in a value-adding way, strengthening investor trust in its strategic use of capital.

Financial Health and Cash Flow

The company’s balance sheet soundness is another important element. Applied Materials holds a debt-to-free cash flow ratio of 1.08, showing that it could potentially pay off all existing debt in just over one year using its present cash flow production. This is far under the screen’s maximum of 5 and shows a careful financial setup with little leverage risk. Also, its 5-year average profit quality, measured as free cash flow to net income, is 92.06%, above the 75% standard. This shows that earnings are being turned into real cash, decreasing dependence on accounting changes and highlighting the lasting nature of its profitability.

Fundamental Analysis Overview

An examination of Applied Materials’ fundamental report supports these findings. The company has an overall rating of 7 out of 10, with very high marks in profitability (9/10) and financial condition (7/10). Main strong points include sector-leading returns on equity and assets, growing operating and profit margins, and a steady record of profitability and positive cash flows. While its valuation is seen as reasonable instead of very cheap, this is common for quality stocks, which often trade at higher prices because of their dependable performance and reduced seen risk.

Suitability for Quality Investors

Applied Materials works in the semiconductor equipment industry, giving it involvement in long-term technological movements like advanced computing, AI, and IoT. Its worldwide presence, along with its part as a facilitator of new ideas, matches more quality investing standards such as downturn endurance and strategic placement in growth sectors. The mix of high profitability, effective capital use, and firm cash flow production makes it an interesting option for investors looking for lasting, high-quality businesses.

For those wanting to investigate other companies that match similar standards, the Caviar Cruise screen is available here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research or consult a financial advisor before making investment decisions.