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Last update on 2024-06-06

Applied Materials (AMAT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Applied Materials (AMAT) scores 7/9 on the Piotroski F-Score for 2023, reflecting strong financial health evaluated across profitability, liquidity, and efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 7

We're running Applied Materials (AMAT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score for Applied Materials (AMAT) is 7 out of 9, reflecting a strong financial position. The score evaluates nine criteria including profitability, liquidity, and operational efficiency. AMAT shows positive trends in net income, cash flow from operations being higher than net income, current ratio, share count reduction, and gross margin. However, it didn’t score points on return on assets decrease, higher leverage, and lower asset turnover, indicating certain areas of concern.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Applied Materials (AMAT) appears to be a strong investment candidate with a score of 7 out of 9. The analysis shows solid profitability and good liquidity measures, though there are some red flags such as declining return on assets and increasing leverage. These issues are worth monitoring, but overall, AMAT seems like a company with strong financial health and operational efficiency, making it worth considering for investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Applied Materials (AMAT)

Company has a positive net income?

Netincome refers to the profit a company has after subtracting all expenses. For Applied Materials (AMAT), having a positive net income indicates profitability.

Historical Net Income of Applied Materials (AMAT)

For 2023, Applied Materials (AMAT) reported a net income of $6,856,000,000, which is indeed positive. This is a significant improvement compared to earlier years, marking a continual growth. Over the last two decades, AMAT has shown fluctuations but generally maintains a positive trend from 2010 onwards. Given the data, AMAT earns 1 point for having positive net income in 2023, highlighting financial health and profitability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) examines a company’s ability to generate cash from continuing operations, which is crucial for sustaining and growing the business. Positive CFO indicates healthy operational efficiency and profitability.

Historical Operating Cash Flow of Applied Materials (AMAT)

For Applied Materials, the CFO in 2023 is $8.7 billion, which is positive. This trend is quite favorable as CFO has shown remarkable growth from $801.75 million in 2003 to $8.7 billion in 2023. Notably, the CFO has consistently increased over the years, experiencing particularly strong growth since 2016. This upward trajectory showcases Applied Materials’ robust operational efficiency and sound financial health. Thus, this criterion adds a full 1 point to the Piotroski score for AMAT.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's efficiency at generating profits from its assets. A higher ROA indicates a more efficient company. It's vital for identifying how well a company is utilizing its resources to generate earnings.

Historical change in Return on Assets (ROA) of Applied Materials (AMAT)

For the year 2023, Applied Materials (AMAT) reported a ROA of 0.2387, compared to 0.2483 in 2022. This represents a decrease, thus setting the ROA criterion point to 0. Notably, over the last 20 years, the operational cash flows of AMAT have generally increased, reflecting robust cash generation capabilities. However, when juxtaposed with the industry median ROA, which has consistently been higher (0.4718 in 2023), AMAT’s recent decline becomes even more pronounced. This declining trend in ROA underscores the importance of assessing how effectively AMAT is utilizing its assets relative to industry standards.

Operating Cashflow are higher than Netincome?

This criterion compares the operating cash flow with net income to ensure that earnings are not driven by accounting adjustments. A higher operating cash flow than net income indicates that a company’s profits are realized in cash and are not just accounting figures.

Historical accruals of Applied Materials (AMAT)

In the case of Applied Materials (AMAT) for the year 2023, the company has an operating cash flow of $8.7 billion compared to a net income of $6.856 billion. This results in the operating cash flow being higher than net income, adding 1 point according to the Piotroski criteria. This trend is positive as it indicates robust cash-generating ability, suggesting that the company's earnings are backed by actual cash flow rather than accounting adjustments. Over the last 20 years, AMAT has displayed a consistently solid operating cash flow, with a notable rise in recent years, highlighting effective operational performance and efficiency.

Liquidity of Applied Materials (AMAT)

Leverage is declining?

Leverage assesses a company's dependence on debt financing by comparing its debt to its equity, aiding in evaluating financial risk.

Historical leverage of Applied Materials (AMAT)

For Applied Materials (AMAT), the leverage ratio has increased from 0.2149 in 2022 to 0.1859 in 2023. This shift illustrates that the company is relying more on debt financing compared to the previous year. This trend can be concerning, indicating an increase in financial risk and potentially reduced financial flexibility. Over the past 20 years, we can observe that AMAT's leverage saw significant fluctuations, but the current rise in leverage continues from a trend starting around 2015 when leverage began to steadily increase. Notably, this recent increase sets a negative mark for the Piotroski F-Score, resulting in 0 points for this criterion.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term obligations with its short-term assets. It is critical for avoiding liquidity issues.

Historical Current Ratio of Applied Materials (AMAT)

For Applied Materials (AMAT), the Current Ratio increased from 2.1582 in 2022 to 2.5973 in 2023. This rise signals an upgraded ability to meet short-term obligations, suggesting improved liquidity. Historically, AMAT's Current Ratio has seen fluctuations, from a peak of 5.3521 in 2005 to varying levels, with a notable dip in 2008. Given the industry median ratio of 3.161 for 2023, AMAT's ratio is still below average, indicating room for improvement. Score for this criterion is +1.

Number of shares not diluted?

A decrease in shares outstanding signals shareholder value accretion, as it suggests share buybacks or lower dilution.

Historical outstanding shares of Applied Materials (AMAT)

In 2023, the outstanding shares for Applied Materials (AMAT) decreased to 840,000,000 from 871,000,000 in 2022. The trend is positive, giving us a 1-point increase in the Piotroski score. Historically, AMAT's commitment to share buybacks or anti-dilutive measures is evident, as shares have gradually decreased from approximately 1.66 billion in 2003 to 840 million in 2023. This downward trajectory in shares outstanding over the years underscores AMAT's continuous focus on enhancing shareholder value.

Operating of Applied Materials (AMAT)

Cross Margin is growing?

Gross Margin is the difference between revenue and cost of goods sold divided by revenue. It's essential as it indicates the efficiency of a company's core activities.

Historical gross margin of Applied Materials (AMAT)

The Gross Margin for Applied Materials has increased from 0.4651 in 2022 to 0.467 in 2023. This marginal increase of 0.0019 is positive and adds 1 point to the Piotroski score. For comparison, the industry median gross margin in 2023 was 0.4718, suggesting AMAT is slightly below the industry average. Historically, AMAT's Gross Margin has shown a solid upward trend from 0.3584 in 2003 to the current 0.467 in 2023, peaking at 0.4732 in 2021. This improvement over the years highlights the company's increasing efficiency in managing production costs and pricing strategies.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets in generating sales revenue and is crucial for evaluating operational efficiency.

Historical asset turnover ratio of Applied Materials (AMAT)

The Asset Turnover ratio for Applied Materials (AMAT) has decreased from 0.9813 in 2022 to 0.9231 in 2023. This is a negative trend, reflecting a decrease in the efficiency with which the company is utilizing its assets to generate revenue. Historically, AMAT's Asset Turnover has fluctuated over the last two decades, yet the recent downturn suggests potential underlying operational inefficiencies or challenges in generating sales from its current asset base. Consequently, for this criterion, AMAT does not score a point.


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