Applied Materials Inc. (NASDAQ:AMAT)

Cash Provided by Operating Activities

The cash generated from operating activities demonstrated a consistent upward trend over the observed periods. Starting at $3,247 million in October 2019, it increased to $3,804 million in October 2020, reflecting a growth of approximately 17%. This upward momentum accelerated in the following years, with cash provided reaching $5,442 million in 2021 and slightly declining to $5,399 million in 2022. A substantial increase occurred in 2023, with cash inflows rising sharply to $8,700 million, followed by a marginal decrease to $8,677 million in 2024. Overall, the growth in cash generated from operations indicates improving operational efficiency and possibly increased profitability.

Free Cash Flow to the Firm (FCFF)

The free cash flow to the firm also exhibited a positive trajectory, closely mirroring the pattern observed in operating cash flows. Beginning at $2,987 million in 2019, FCFF increased progressively to $3,572 million in 2020 and further to $4,952 million in 2021. A slight decline to $4,788 million was noted in 2022, consistent with the minor decrease in operating cash flow during the same year. Subsequently, FCFF showed a significant surge to $7,667 million in 2023, remaining stable at that level in 2024. The strong growth in FCFF suggests healthy cash generation after accounting for capital expenditures, enabling greater capacity for expansion, debt repayment, or returns to shareholders.

Summary of Trends

Both key cash flow metrics reflect a general pattern of growth over the six-year period, with notable acceleration from 2021 onward. The stability between the last two years for both measures indicates a plateau at a higher cash flow level compared to earlier years. This pattern may suggest that the company has reached a more mature phase in its cash generation capabilities or that external factors have stabilized its financial performance. The alignment in trends between operating cash flow and free cash flow underscores effective management of capital expenditures relative to cash generation from core operations.

Over the analyzed period from October 2019 to October 2024, the effective income tax rate (EITR) demonstrated a generally declining trend with some minor fluctuations. Starting at 17.2% in 2019, the rate decreased significantly to 13.1% in 2020 and remained relatively stable around 13% through 2021. There was a slight increase to 14.1% in 2022, followed by a notable decrease to 11.1% in 2023. In 2024, the EITR modestly rose again to 12%. Overall, the tax rate shows a downward movement with small variations year-over-year, suggesting possible tax planning strategies or changes in tax regulation impacting the company's effective tax burden.

Regarding cash payments for interest, net of tax, the values remained fairly consistent throughout the six-year span. The amounts fluctuated slightly between US$176 million and US$190 million. In 2019, interest payments were US$181 million, increasing slightly to US$190 million in 2020, then decreasing to US$178 million in 2021 and US$176 million in 2022. The figure rose again to US$182 million in 2023 before a minor decrease to US$180 million in 2024. This stability indicates that the company's interest expenses have been controlled effectively and did not experience significant volatility, reflecting stable debt levels or interest rates over the period analyzed.

Enterprise Value (EV)

The enterprise value exhibited significant growth from 2019 to 2021, increasing from approximately $56.5 billion to nearly $130 billion. This was followed by a decline in 2022 to about $91.3 billion. Subsequently, the enterprise value rose again in 2023 and 2024, reaching around $133.4 billion and $134.6 billion respectively. The trend indicates volatility with an overall upward trajectory over the six-year period.

Free Cash Flow to the Firm (FCFF)

Free cash flow to the firm demonstrated consistent growth over the entire period. Starting at nearly $3.0 billion in 2019, it gradually increased year-over-year, reaching $7.7 billion by 2023 and maintaining that level in 2024. This steady increase suggests improved cash generation capabilities.

EV/FCFF Ratio

The EV/FCFF ratio rose from 18.91 in 2019 to a peak of 26.22 in 2021, indicating that the enterprise value was increasing at a faster rate relative to free cash flow during this period. After 2021, the ratio declined significantly to 19.06 in 2022 and continued to decrease slightly to around 17.4-17.55 in the subsequent years. This decline suggests a revaluation or improved cash flow performance relative to enterprise value, potentially indicating a more attractive valuation or enhanced operational efficiency.