Is Applied Materials a Practical Investment?

With shares of Applied Materials (NASDAQ:AMAT) trading at around $13.72, is AMAT an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Applied Materials is a highly diversified company that beat expectations and saw order growth last quarter. If you want to invest in semiconductor equipment, then this is an option to consider. Cash flow is strong, and there is increased demand in several areas, including commercial aerospace and mobile. The automotive market is also likely to see increased demand in the near future.

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That’s the good news. The bad news is that the consumer demand is weak, and the defense market isn’t promising due to budget cuts. The stock is also trading at 652 times earnings, which is well above the industry average of 18 times earnings. Margins also leave a lot to be desired. Perhaps most important is that there have been several large insider sales this month. As far as solar exposure, it’s difficult to determine whether or not this will be a long-term positive or a long-term negative.

Let’s take a look at more important numbers prior to forming an opinion on the stock…