Filing Flows › Companies › Applied Materials › Analysis traps
Applied Materials (AMAT): analysis traps
Where its figures could mislead a reader, and what to check before taking them at face value · Data: Q3 FY26, to Jul 26, 2026, filed Aug 20, 2026; rules v1.1
Applied Materials (AMAT): 0 rules of 10 triggered on the filings to Jul 26, 2026. 2 to review; 2 not applicable. Each is a question to verify, with the normal explanation that would produce the same figures.
Check these first
Low P/E at a cyclical peak = undervalued To review · confidence medium
Net income of $9.3B is at a high against a median of $6.5B over eight years; at 27.6× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (39.1×).
A precise DCF value = the true value To review · confidence high
The DCF's point value is 115.97 a share (price 319.25); 71% of it is the terminal value, a number about years no one has seen. Moving revenue growth (each year) by ±5 pts alone takes it from 94.84 to 141.20; across every method the research ran the range is 64 to 900. The value is a range; the decimals are not information.
Innocent reading: A stable, mature business with a narrow range of outcomes, where the point value is a fair summary.
Every rule
A01 FCF growth = the business improved Not triggered confidence high
Free cash flow did not rise ($7.5B → $5.7B): the trap does not arise.
The figures and how they are read
| Fiscal year before | FY24 |
| Fiscal year | FY25 |
| Operating cash flow, year before | $8.7B |
| Operating cash flow | $8.0B |
| Capex, year before | $1.2B |
| Capex | $2.3B |
| Free cash flow, year before | $7.5B |
| Free cash flow | $5.7B |
| Change in FCF | −$1.8B |
| Change in capex | $1.1B |
| Working capital: change in its cash contribution | −$1.3B |
FCF = operating cash flow − cash capex; ΔFCF = ΔOCF − ΔCapEx; the working-capital part is the change in the cash-bridge items (receivables, inventory, payables, accruals), with the sign of the cash flow statement
Source: FY25 (cash flow statement, fiscal year) · FY24 (cash flow statement, fiscal year before)
A07 Stock compensation added back = no economic cost Not triggered confidence high
Stock compensation is 2.4% of revenue: small enough that adding it back changes little.
The figures and how they are read
| Fiscal year | FY25 |
| Stock compensation | $668M |
| Revenue | $28.4B |
| SBC / revenue | +2.4% |
| Buybacks | $4.9B |
| Buybacks / SBC | 7.3 |
| Diluted shares, year before | 834.0M shares |
| Diluted shares | 808.0M shares |
| Diluted shares: change | -3.1% |
SBC / revenue from the cash flow statement's add-back; the diluted weighted share count year over year; buybacks from the financing section
Source: FY25 (stock compensation, buybacks and the diluted share count, fiscal year)
B02 Receivables growing = future cash is certain Not triggered confidence medium
Receivables grew 33% against revenue 25% in Q3 FY26; DSO 70 against a median of 71: collections are keeping pace with sales.
The figures and how they are read
| Quarter | Q3 FY26 |
| Revenue, year over year | +24.8% |
| Receivables, year over year | +33.2% |
| Quarter before | Q2 FY26 |
| Revenue y/y, quarter before | +11.4% |
| Receivables y/y, quarter before | +3.0% |
| Days sales outstanding | 70.2 |
| DSO, median of eight quarters | 71.3 |
| Receivables | $7.7B |
| Revenue | $9.1B |
receivables and revenue against the same quarter a year earlier; DSO = receivables / quarterly revenue × days, against the median of the eight quarters before
Source: Q3 FY26 (receivables and revenue) · Q3 FY25 (the same quarter a year earlier)
B08 Adjusted profit = economic profit Not triggered confidence low
Adjusted and GAAP EPS were within 10% of each other in the last 3 quarters.
The figures and how they are read
| Quarter / adjusted EPS / GAAP EPS / gap | 2026-01-31 / 2.38 / 2.54 / -0.067; 2026-04-30 / 2.86 / 3.51 / -0.227; 2026-07-31 / 3.5 / 3.17 / 0.094 |
| Quarters with adjusted ≥ 10% above GAAP | 0 |
| Quarters compared | 3 |
| Latest gap | +9.4% |
the analysts' 'actual' (usually the company's adjusted EPS) against GAAP net income ÷ diluted shares for the matching quarter; a gap of 10% or more counts (the stand-in until three releases' reconciliation tables are on file)
Source: 2026-01-31 (adjusted 2.38 vs GAAP 2.54) · 2026-04-30 (adjusted 2.86 vs GAAP 3.51) · 2026-07-31 (adjusted 3.50 vs GAAP 3.17)
C02 Low net debt = no refinancing risk Not triggered confidence medium
$2.5B comes due within a year, 6.0× covered by cash and investments of $9.2B plus $5.6B of free cash flow.
The figures and how they are read
| Cash and investments | $9.2B |
| Debt | $7.7B |
| Net debt | −$1.5B |
| Due within a year | $2.5B |
| Read from | the current portion of debt on the balance sheet |
| Free cash flow, twelve months | $5.6B |
| Cash plus free cash flow | $14.9B |
| Coverage of what is due | 6.0 |
| Due in the second year | — |
| Balance sheet date | 2026-07-26 |
due within a year from the maturity table (else the current portion of debt), against cash and investments plus free cash flow over the last twelve months (zero if negative); no credit lines assumed
Source: 2026-07-26 (debt maturities, cash and investments)
D03 EPS growth = profit growth Not triggered confidence high
EPS rose 43% and net income rose 43% in Q3 FY26; the share count fell 0.2%: EPS growth follows profit growth.
The figures and how they are read
| Quarter | Q3 FY26 |
| Quarter before | Q3 FY25 |
| EPS, year before | $2.22 |
| EPS | $3.17 |
| Net income, year before | $1.8B |
| Net income | $2.5B |
| Diluted shares, year before | 802.0M shares |
| Diluted shares | 800.0M shares |
| EPS growth | +43.0% |
| Net income growth | +42.7% |
| Diluted shares: change | -0.2% |
| eps from profit | $0.95 |
| eps from share count | $0.01 |
EPS and net income against the same quarter a year earlier; the EPS bridge attributes the change to profit first, then to the share count (the order is fixed and disclosed)
Source: Q3 FY26 (net income, diluted shares, EPS) · Q3 FY25 (the same quarter a year earlier)
E02 Low P/E at a cyclical peak = undervalued To review confidence medium
Net income of $9.3B is at a high against a median of $6.5B over eight years; at 27.6× the market is not pricing it as cheap, but a multiple on this year's profit still understates the mid-cycle one (39.1×).
The figures and how they are read
| market value | $255.4B |
| net income ttm | $9.3B |
| pe ttm | 27.60 |
| net income median fy | $6.5B |
| pe mid cycle | 39.10 |
| net income peak fy | $7.2B |
| years | FY18 / 3313.0; FY19 / 2706.0; FY20 / 3619.0; FY21 / 5888.0; FY22 / 6525.0; FY23 / 6856.0; FY24 / 7177.0; FY25 / 6998.0 |
| down years in window | 2 |
P/E on the trailing twelve months' net income against the P/E on the median net income of the last eight fiscal years (a mid-cycle stand-in); 'at a peak' = this year's profit at or above 90% of the best year and at least 1.3× the median
Source: Q3 FY26 (net income, trailing twelve months)
What would show the trap does not apply
- Profit holds at this level through the next two years (the eight-year peak was a new base, not a top)
- The industry's capacity and prices stay where they are rather than reverting
Look again: next filing.
E07 A precise DCF value = the true value To review confidence high
The DCF's point value is 115.97 a share (price 319.25); 71% of it is the terminal value, a number about years no one has seen. Moving revenue growth (each year) by ±5 pts alone takes it from 94.84 to 141.20; across every method the research ran the range is 64 to 900. The value is a range; the decimals are not information.
The figures and how they are read
| dcf value | 115.97 |
| price | 319.25 |
| terminal value share | +71.2% |
| swing by input | Revenue growth (each year) / ±5 pts / 94.84 / 141.2; WACC / ±1 pt / 103.63 / 131.52; Operating margin / ±3 pts / 103.38 / 128.57; Tax rate / ±5 pts / 108.77 / 123.18 |
| range all methods | 64.09; 900.0 |
the DCF's point value against the share of it that is the terminal value and the value at each input moved by one step (growth ±5 pts, WACC ±1 pt, margin ±3 pts …); the range across every method the research ran
Source: 2026-11-08 (valuation research)
What would explain it innocently
- A stable, mature business with a narrow range of outcomes, where the point value is a fair summary
- The inputs that matter most are themselves well known (a regulated return, a long contract)
What to look for in the filing
- Which input you believe differs from the research's and why
- What the price implies for growth (the reverse DCF on the fair-value page)
What would show the trap does not apply
- The DCF's value is robust to the terminal growth and discount rate (the range's low end is still above the price)
- The company's cash flows over the next three years track the DCF's early years
Look again: next filing.
J06 A bank's low P/E and high profit = safe Not applicable
not a bank
J08 A REIT's low net income = the dividend is unsafe Not applicable
not a REIT
What the statuses mean
Triggered: the filings show the pattern; read the normal explanations and the missing evidence before concluding anything. To review: one quarter or a weak signal; a reader's judgement, not a pattern. Not triggered: the pattern is absent on these figures. Insufficient data: the filings read so far do not hold what the rule needs; this is not a clean bill. Not applicable: the rule is not meant for this kind of company (a bank's working capital, a loss-making quarter's EPS growth). Out of date: the latest filing is more than fifteen months old.
Severity is what the pattern could mean for cash, value or solvency; confidence is how reliable the inputs and the reading are. The two are kept apart.
Record a view
A reader's judgement, grounds, what would change it and the next review; kept in the browser (needs JavaScript).
Every rule and the companies it triggers on → Applied Materials: cash flow → Earnings quality score →
Each rule reads the company's own filings by a fixed formula and says what would explain the same figures innocently. A triggered rule is a question to verify, not a finding of manipulation, and not a view on the stock. Missing data is shown as missing, never as clear. Not investment advice.