Financial statement analysis and common stock valuation

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)

Analysis of Short-term (Operating) Activity Ratios
Quarterly Data

Evaluates revenues and output generated by the Applied Materials Inc. assets. Operating performance ratios describe the relationship between the Applied Materials Inc. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle

Analysis of Revenues

• Revenues as Reported

Income Statement

The income statement (statement of earnings) reports on the performance of Applied Materials Inc., the result of its operating activities.

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

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.

Common Stock Valuation Ratios
Quarterly Data

Relative valuation technique determine the value of Applied Materials Inc. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Common-Size Income Statement

Income statement components (revenues and expenses) shown as percentage of total sales.

Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

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.

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

Dividend Discount Model (DDM)

The dividend discount model (DDM) is a technique for estimating the value of a share of Applied Materials Inc. common stock issue as the present value of all future dividends.

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

Common Stock Valuation Ratios

Relative valuation technique determine the value of Applied Materials Inc. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Current Valuation Ratios
• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)