Should You Buy Applied Materials Stock Before Earnings?

by Rob Otman
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Applied Materials (Nasdaq: AMAT) is a large cap company that operates within the semiconductor industry. Its market cap is $48 billion today, and the total one-year return is 65.52% for shareholders.

Applied Materials stock is beating the market, and it reports earnings next week. But does that make it a good buy today? To answer this question, we've turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Applied Materials reported a recent EPS growth rate of 162.07%. That's above the semiconductor industry average of 143.96%. That's a great sign. Applied Materials’ earnings growth is outpacing that of its competitors.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the semiconductor industry is 53.19. And Applied Materials’ ratio comes in at 16.89. It's trading at a better value than many of its competitors.

Debt-to-Equity The debt-to-equity ratio for Applied Materials stock is 64.56. That's above the semiconductor industry average of 55.87. That's not a good sign. Applied Materials’ debt levels should be lower.

Free Cash Flow per Share Growth Applied Materials’ FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of Applied Materials comes in at 23.24% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Applied Materials’ profit margin is above the semiconductor average of 15.29%. So that's a positive indicator for investors.

Return on Equity Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Applied Materials is 35.76%, and that's above its industry average ROE of 16.6%.

Applied Materials stock passes five of our six key metrics today. That's why our Investment U Stock Grader rates it as a Strong Buy.

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Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

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