Rating Change #3

Applied Materials Inc ( AMAT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Although AMAT's debt-to-equity ratio of 0.22 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.78, which clearly demonstrates the ability to cover short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, APPLIED MATERIALS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Net operating cash flow has increased to $698.00 million or 32.92% when compared to the same quarter last year. Despite an increase in cash flow, APPLIED MATERIALS INC's cash flow growth rate is still lower than the industry average growth rate of 58.32%.
  • 41.70% is the gross profit margin for APPLIED MATERIALS INC which we consider to be strong. Regardless of AMAT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.90% trails the industry average.

Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. The company has a P/E ratio of 7.9, equal to the average electronics industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Applied has a market cap of $15.01 billion and is part of the technology sector and electronics industry. Shares are up 9.9% year to date as of the close of trading on Wednesday.

You can view the full Applied Ratings Report or get investment ideas from our investment research center.

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