Applied Materials, Inc. is in a strong buy position for me when looking at what I feel is current fair price per share versus current market price per share. I am not analyzing current market conditions very much, including the lagging semiconductor sector, etc and I do have a pretty good feeling that most of those items are major factors in suppressing AMAT’s stock price. However, if you are believer in the company and it’s long term prospects, take a look at my analysis below on why I feel AMAT is a strong value play right now and a good long-term buy.
(Data as of 10/12/2018) – My methodology for calculating a fair value price focuses on a mix of dividend fundamentals, earnings, and both past and future growth estimates. I also factor in some external fair price estimates to balance my own. Finally, I come up with a 0-100% score on whether it’s a buy (closer to 100%, the stronger the buy signal).
|Price||Div||Future Div||Div Yld||5Yr Div CAGR||Chowder (Yld+Gr)||Div Payout Ratio|
Basic earnings and other ratios:
|P/E||Future P/E||PEG||EPS||Future EPS||Hist. ROR|
Using the above data elements, I calculate fair value stock price using different estimation methodologies:
1. Aggregate fair value stock price. Using the various pricing methods above, I calculated an aggregate fair value price (shown below). Current market price of approx. $33/sh is well below what I estimate fair value to be. Stock is priced to buy.
|Fair Value||Consider Buy|
2. Buy signals. I look at how well the stock fairs against a battery of various quality metrics (shown below). If the aggregate score of those metrics is above 75% (range is 0-100), I consider the company safe to invest in (if the price is right). AMAT’s current buy signal score is 90%.
|Priced to buy?||Div Payout Ratio?||Chowder < 0.12?||EPS 5yr positive?||Sales 3yr? positive?||P/E < 20?||Score|
So, with an aggregate buy signal score of 90% and a fair value stock price estimate above the current market price, I would conclude that AMAT is a good value for the long-term investor and it’s a great time to add some shares.