Financial statement analysis and common stock valuation

Analysis of Profitability Ratios

Measures the income of Applied Materials Inc. relative to its revenues and invested capital.

• Profitability Ratios (Summary)
• Gross Profit Margin
• Operating Profit Margin
• Net Profit Margin
• Return on Equity (ROE)
• Return on Assets (ROA)

Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the Applied Materials Inc. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to The Firm (FCFF)
• Interest Paid, Net of Tax
• EV to FCFF Ratio, Current
• EV to FCFF Ratio, Historical

Balance Sheet: Liabilities and Stockholders’ Equity

The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.

Cash Flow Statement
Quarterly Data

The cash flow statement provides information about Applied Materials Inc. cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on Applied Materials Inc. balance sheet.

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

• Rates of Return
• Variance and Covariance
• Systematic Risk (β) Estimation
• Expected Rate of Return

Analysis of Liquidity Ratios
Quarterly Data

Measures the adequacy of a Applied Materials Inc. cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio

Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.

Analysis of Geographic Areas

Applied Materials Inc. operates in 7 regions: United States; China; Korea; Taiwan; Japan; Europe; and Southeast Asia.

• Area Asset Turnover
• Net revenue
• Long-lived assets

Analysis of Long-term (Investment) Activity Ratios
Quarterly Data

Measures how efficiently Applied Materials Inc. generates revenues from its investments in fixed or total assets.

• Long-term Activity Ratios (Summary)
• Net Fixed Asset Turnover
• Total Asset Turnover
• Equity Turnover

Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• FCFE Growth Rate (g)

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Applied Materials Inc. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Applied Materials Inc. earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio

Common-Size Balance Sheet: Assets

Assets components shown as percentage of total assets.