Stock Analysis on Net
Stock Analysis on Net

Applied Materials Inc. (NASDAQ:AMAT)

$24.99

Economic Value Added (EVA)

Microsoft Excel

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

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Economic Profit

Applied Materials Inc., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Oct 25, 2020 Oct 27, 2019 Oct 28, 2018
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Applied Materials Inc. economic profit increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Net Operating Profit after Taxes (NOPAT)

Applied Materials Inc., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Oct 25, 2020 Oct 27, 2019 Oct 28, 2018
Net income
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for credit losses2
Increase (decrease) in warranty reserves3
Increase (decrease) in severance and related charges reserves4
Increase (decrease) in equity equivalents5
Interest expense
Interest expense, operating lease liability6
Adjusted interest expense
Tax benefit of interest expense7
Adjusted interest expense, after taxes8
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
Net operating profit after taxes (NOPAT)

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for credit losses.

3 Addition of increase (decrease) in warranty reserves.

4 Addition of increase (decrease) in severance and related charges reserves.

5 Addition of increase (decrease) in equity equivalents to net income.

6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

7 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

8 Addition of after taxes interest expense to net income.

9 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

10 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Applied Materials Inc. NOPAT increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Cash Operating Taxes

Applied Materials Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Oct 25, 2020 Oct 27, 2019 Oct 28, 2018
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Applied Materials Inc. cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

Invested Capital

Applied Materials Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Oct 25, 2020 Oct 27, 2019 Oct 28, 2018
Short-term debt
Current portion of long-term debt
Finance lease liabilities, current
Long-term debt, net of current portion
Operating lease liability1
Total reported debt & leases
Stockholders’ equity
Net deferred tax (assets) liabilities2
Allowance for credit losses3
Warranty reserves4
Severance and related charges reserves5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Adjusted stockholders’ equity
Construction in progress8
Available-for-sale investments9
Invested capital

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of warranty reserves.

5 Addition of severance and related charges reserves.

6 Addition of equity equivalents to stockholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 Subtraction of available-for-sale investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Applied Materials Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Cost of Capital

Applied Materials Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt and finance lease liabilities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2023-10-29).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt and finance lease liabilities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2022-10-30).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt and finance lease liabilities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2021-10-31).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt and finance lease liabilities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-10-25).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt and finance lease liabilities3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2019-10-27).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt and finance lease liabilities3 ÷ = × × (1 – 23.40%) =
Operating lease liability4 ÷ = × × (1 – 23.40%) =
Total:

Based on: 10-K (reporting date: 2018-10-28).

1 US$ in millions

2 Equity. See details »

3 Debt and finance lease liabilities. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Applied Materials Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Oct 25, 2020 Oct 27, 2019 Oct 28, 2018
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Advanced Micro Devices Inc.
Analog Devices Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
ON Semiconductor Corp.
Qualcomm Inc.
Texas Instruments Inc.

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Applied Materials Inc. economic spread ratio improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Economic Profit Margin

Applied Materials Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Oct 29, 2023 Oct 30, 2022 Oct 31, 2021 Oct 25, 2020 Oct 27, 2019 Oct 28, 2018
Selected Financial Data (US$ in millions)
Economic profit1
Net sales
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Advanced Micro Devices Inc.
Analog Devices Inc.
Broadcom Inc.
Intel Corp.
KLA Corp.
Lam Research Corp.
Micron Technology Inc.
NVIDIA Corp.
ON Semiconductor Corp.
Qualcomm Inc.
Texas Instruments Inc.

Based on: 10-K (reporting date: 2023-10-29), 10-K (reporting date: 2022-10-30), 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-10-25), 10-K (reporting date: 2019-10-27), 10-K (reporting date: 2018-10-28).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Applied Materials Inc. economic profit margin improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.