Which Chip Stock is the Best Earnings Trends Winner?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 5 chip stocks rank via earnings trends:

Applied Materials Inc. (NASDAQ:AMAT): Current Price $13.74

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 8,129 5,014 9,549 10,520 8,719
Diluted EPS ($) 0.70 -0.23 0.70 1.45 0.09

We note that Applied Materials has had a rather indifferent year 2012, with both revenue and EPS, particularly the latter, falling sharply.

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Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012 Jan. 31, 2013
Revenue ($) in millions 2,189 2,541 2,343 1,646 1,573
Diluted EPS ($) 0.09 0.22 0.17 -0.39 0.03

Between April 2012 and January 2013, we note that revenue is down by almost 40%, and that EPS slammed into the negative in October 2012. Though EPS clawed back into the black in the latest quarter, these are uninspiring numbers, and we’ll drop Applied Materials from the list…