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The Motley Fool take
Applied Materials bottoms out
Shares of semiconductor equipment-maker Applied Materials (Nasdaq: AMAT) have been bouncing around lately, even after the company delivered some good news.
At the headline level, you’d be hard-pressed to call the company’s fiscal 2008 anything but a poor performance. Sales plummeted 16 percent for the year. The operating margin shed around 8 percentage points to end at 16.4 percent. And the diluted earnings per share plunged about 42 percent.
But consider this: In the final quarter of Applied Materials’ fiscal year, sales amounted to just $2.04 billion. But the company took in new orders of $2.21 billion. The backlog of work to be done now stands at $4.85 billion — 33 percent higher than at the end of the last fiscal year.
Furthermore, heading into fiscal 2009, Applied Materials’ CEO promised to “implement further cost-reduction actions” that could produce annual savings of as much as $400 million — thus answering the unvoiced rhetorical question: What goes great with better sales? Improved profit margins.
Trading with a price-to-earnings (P/E) ratio of around 12, with analysts predicting 10 percent long-term profit growth over the next half-decade and backlog trends supporting these growth predictions, Applied Materials looks cheap. If you’re still skittish, add it to your watch list and consider buying it on a further drop.
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