Applied Materials (AMAT) Hits Fresh Highs: Is There Still Room To Run?

Have you been paying attention to shares of Applied Materials, Inc. (NASDAQ:AMAT) ? Shares have been on the move with the stock up 34.67% over the past month. AMAT hit a new 52-week high of $61.76 in the previous session. Applied Materials has gained 20.52% since the start of the year compared to the 9.16% move for the Computer and Technology sector and the 20.24% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on February 14, 2018, Applied Materials reported EPS of $1.06 versus the Zacks Consensus Estimate of $0.97 while it beat the consensus revenue estimate by 2.47%.

For the current fiscal year, Applied Materials is expected to post earnings of $4.39 per share on $17.39 billion in revenues. This represents a 35.08% change in EPS on a 19.61% change in revenues. For the next fiscal year, the company is expected to earn $4.55 per share on $18.67 billion in revenues. This represents changes of 3.64% and 7.37%, respectively.

Valuation Metrics

Applied Materials may be at a 52-week high right now, but what might the future hold for AMAT? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Applied Materials has a Value Score of C. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 14.03x current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 16.71x versus its peer group's average of 17.06x. Additionally, the stock has a PEG ratio of 1.17. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Applied Materials, Inc. Price and Consensus

Applied Materials, Inc. Price and Consensus | Applied Materials, Inc. Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Applied Materials currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 or 2 (Buy) and Style Scores of A or B, it looks as if Applied Materials fits the bill. Thus, it seems as though AMAT shares could have potential in the weeks and months to come.

How Does Applied Materials Stack Up to the Competition?

Shares of Applied Materials have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including AEIS, NANO, and WTS, all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 1.89% of all the industries we have in our universe, so it looks like there are some nice tailwinds for AMAT, even beyond its own solid fundamental situation.