As of June 7, 2025, Applied Materials Inc's estimated intrinsic value ranges from $85.82 to $282.79 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $282.79 | +69.6% |
| Discounted Cash Flow (5Y) | $224.36 | +34.6% |
| Dividend Discount Model (Multi-Stage) | $186.66 | +11.9% |
| Dividend Discount Model (Stable) | $161.99 | -2.9% |
| Earnings Power Value | $85.82 | -48.5% |
Is Applied Materials Inc (AMAT) undervalued or overvalued?
With the current market price at $166.74, the stock appears to be significantly undervalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Applied Materials Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.89 | 1.21 |
| Cost of equity | 8.0% | 11.6% |
| Cost of debt | 4.0% | 4.5% |
| Tax rate | 12.6% | 13.1% |
| Debt/Equity ratio | 0.05 | 0.05 |
| After-tax WACC | 7.8% | 11.3% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $224 | $180,142M | 79.2% |
| 10-Year Growth | $283 | $227,030M | 64.1% |
| 5-Year EBITDA | $228 | $182,696M | 79.5% |
| 10-Year EBITDA | $285 | $228,479M | 64.3% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $6,347M |
| Discount Rate (WACC) | 11.3% - 7.8% |
| Enterprise Value | $56,169M - $81,752M |
| Net Debt | $92M |
| Equity Value | $56,077M - $81,660M |
| Outstanding Shares | 802M |
| Fair Value | $70 - $102 |
| Selected Fair Value | $85.82 |
| Metric | Value |
|---|---|
| Market Capitalization | $133809M |
| Enterprise Value | $133901M |
| Trailing P/E | 19.80 |
| Forward P/E | 16.25 |
| Trailing EV/EBITDA | 14.35 |
| Current Dividend Yield | 97.98% |
| Dividend Growth Rate (5Y) | 10.94% |
| Debt-to-Equity Ratio | 0.05 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $84.84 |
| Discounted Cash Flow (5Y) | 25% | $56.09 |
| Dividend Discount Model (Multi-Stage) | 20% | $37.33 |
| Dividend Discount Model (Stable) | 15% | $24.30 |
| Earnings Power Value | 10% | $8.58 |
| Weighted Average | 100% | $211.14 |
Based on our comprehensive valuation analysis, Applied Materials Inc's weighted average intrinsic value is $211.14, which is approximately 26.6% above the current market price of $166.74.
Key investment considerations:
Given these factors, we believe Applied Materials Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.