Buffett Brain · Research note
Score updated 26 Sept 2026 · analysis from 1 Jun 2026
AMAT· Technology
Applied Materials
Applied Materials is a wonderful toll booth on the chip industry priced at a frightening 42 times earnings.
Buffett fit
Strong fit
Owner
91
Durability
83
Management
85
Price
0
Score updated 26 Sept 2026 · analysis from 1 Jun 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned all of Applied Materials, I would be pleased with the engine and unhappy with the entry ticket.
The full reasoning comes with a free account.
Chips are not going away, and the tools that make them get harder and more specialized with every node, which protects Applied's place at the table.
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Management has behaved like owners. They have shrunk the share count by about 3 percent a year, so each remaining share owns more of the company, and they have kept debt modest at 0.27 times equity with interest covered more than 31 times over.
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There is no here, and I will not pretend otherwise. The owner-earnings yield is just 1.6 percent and the earnings yield 2.4 percent against a near 42 and an EV/ of 43, which means the price already assumes years of flawless growth.
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1Returns on capital of 21.6 percent trailing and 30.6 percent over five years show the business compounds reinvested money at high rates.
- 2 of 48.9 percent and of 29.5 percent reflect strong and a hard-to-displace position in customer fabs.
- 3A fortress balance sheet, with of just 0.27 and interest covered more than 31 times, leaves no question of solvency.
- 4Net debt to EBITDA of essentially zero at 0.01 means the company owes almost nothing on a net basis.
Concerns
7- 1The price is the whole problem: a near 42 and EV/ of 43 leave you paying up for a business growing earnings at under 8 percent.
- 2The owner-earnings yield is only 1.6 percent, less than a Treasury bill, so the cash return to an owner today is thin.
- 3Revenue has compounded at just 5.3 percent, modest growth that struggles to justify a richly priced stock.
- 4This is a cyclical industry, and chip-equipment orders can fall hard in a downturn no matter how strong the franchise.
Price history
$540+327.9%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Applied Materials sells the deposition, etch, and inspection machines that every chipmaker needs to turn sand into logic and memory, and it earns again on the parts and service that keep those machines running for years. The economics show it: a 48.9 percent and a 29.5 percent mean the company keeps roughly thirty cents of every sales dollar before tax. Revenue has compounded at only 5.3 percent and earnings per share at 7.7 percent, so this is a high-quality business growing at a measured pace, not a rocket.
How this analysis has moved
The call has held across 2 reviews.
Sep 27, 2026 → Oct 4, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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