Applied Materials (AMAT): fair value

Fair-value band

The normal range for this name runs from $78 (cheap) to $289 (expensive); it is now priced at $413.

Is Applied Materials undervalued?

Expensive. Applied Materials trades at $413, 125% above the fair value this model estimates; the normal range for this name runs from $78 (cheap) to $289 (expensive).

Diligence checklist

7 pass · 1 fail · 3 no data

• PASSCash actually collected from profit, last 12 months: 112%XBRL · Applied Materials gets $1.12 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• PASSGap between paper profit and real cash: +2.2%XBRL · Applied Materials's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: 0.06xXBRL · Applied Materials could pay off everything it owes, net of the cash it holds, with 0.06 of a single year's earnings. My limit for a name I would buy is three years, so debt is not a risk here.
• PASSHow much more it earns on capital than that capital costs: +10.97ppXBRL · Applied Materials earns 11.0 points more on the capital it employs than that capital costs. The gap is real but not wide, so growth here creates value at a modest rate rather than compounding it. The gap is no wider than it was at the start of the window.
• FAILStock sold by executives and directors on the open market, last 6 months: $174.1MEDGAR (dealbreaker) · Dickerson Gary E sold $104.8M of stock in the last 6 months, outside any pre-planned selling schedule, and $174.1M went out that way in total. My rulebook says more than $5 million of this kind of selling is disqualifying for a "long" position (buying the stock). The full list of open-market sellers: Dickerson Gary E $104.8M, Raja Prabu G. $31.6M, Nalamasu Omkaram $20.8M. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either. filing ↗
• N/AHow long the CEO has run this company: n/aTEXT · I couldn't establish when Applied Materials's current chief executive took the job: no appointment appears in the 8-K item 5.02 history.
• PASSProfit margin held up during the last sales slump: 43.7% vs 45.8% baseXBRL · The last time Applied Materials's revenue fell, its profit margin per unit sold only slipped a little, from about 45.8% to 43.7%. It means Applied Materials isn't being forced to cut prices to keep product moving, which is what a company with a weak competitive position has to do. This is the accounts talking, not the filing: I'm reading the 5 quarters from April 2019 to April 2020, measured against the year going into it, and a shift in what the company sold can imitate pricing power either way.
• PASSNormal profit margin across a full business cycle: FCF margin 19.0% vs 22.0% medianXBRL · Applied Materials's current cash margin (19.0%) sits a little below its long-run average (22.0%). My valuation grows the average, so a soft patch doesn't get written into the value as if it were permanent. Across the window the margin ran between 16.3% in January 2023 and 29.9% in January 2024.
• N/AHow much of the stock trades on an average day: $2,987MMARKET · Applied Materials trades so much volume that this basically isn't a concern. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• N/AShare of revenue from its single biggest customer: not establishedTEXT · I fetched and read Applied Materials's December 12, 2025 10-K but found no sentence about customer concentration. That isn't the same as the filing saying there is none: it may simply be worded in a way my search doesn't catch. Read Item 1 and the concentration-of-risk note yourself before trusting this row. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. Applied Materials hasn't changed auditors in the last 2 years, so there's no such red flag here.