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Today we're going to take a look at the well-established Applied Materials, Inc. (NASDAQ:AMAT). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$67.62 and falling to the lows of US$55.00. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Applied Materials' current trading price of US$59.23 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Applied Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Applied Materials
What is Applied Materials worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.7% below my intrinsic value, which means if you buy Applied Materials today, you’d be paying a fair price for it. And if you believe that the stock is really worth $65.59, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Applied Materials’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Applied Materials generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 40% over the next couple of years, the future seems bright for Applied Materials. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? AMAT’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?