Applied Materials Inc (AMAT)
Profitability ratios
Return on sales
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | Oct 27, 2019 | |
|---|---|---|---|---|---|
| Gross profit margin | 47.13% | 46.87% | 47.81% | 45.35% | 43.72% |
| Operating profit margin | 29.13% | 30.43% | 30.18% | 25.73% | 22.93% |
| Pretax margin | 29.37% | 29.70% | 29.66% | 24.56% | 22.38% |
| Net profit margin | 26.09% | 25.50% | 25.79% | 21.34% | 18.52% |
Based on the provided data, let's analyze the profitability ratios of Applied Materials Inc. for the five fiscal years:
1. Gross Profit Margin:
- Applied Materials Inc.'s gross profit margin has been relatively stable over the past five years, ranging from 43.72% in 2019 to 47.32% in 2021. This ratio measures the percentage of revenue that exceeds the cost of goods sold, indicating the efficiency of the company's production and pricing strategies. The upward trend from 2019 to 2021 indicates improved cost management and/or pricing power.
2. Operating Profit Margin:
- The operating profit margin reflects the company's ability to generate profits from its core business activities. Applied Materials Inc.'s operating profit margin decreased from 30.19% in 2022 to 28.86% in 2023. However, the margin has generally been healthy, showing the company's effective cost control and efficient operations.
3. Pretax Margin:
- The pretax margin measures the percentage of each dollar of revenue that turns into pre-tax profits. Applied Materials Inc.'s pretax margin fluctuated slightly but remained relatively stable over the five fiscal years, indicating consistent performance in generating profits before taxes.
4. Net Profit Margin:
- The net profit margin, which represents the company's bottom-line profitability after all expenses and taxes, exhibited an increasing trend. The net profit margin rose from 18.52% in 2019 to 25.86% in 2023, indicating enhanced efficiency in managing operating expenses and/or lower tax burdens.
Overall, the profitability ratios depict Applied Materials Inc.'s ability to efficiently manage production costs, control operating expenses, and generate profits. The company's consistent or improving margins suggest operational efficiency and effective management of costs and pricing. However, the slight decrease in operating profit margin in 2023 warrants further analysis to identify any potential underlying factors impacting profitability.
Return on investment
| Oct 29, 2023 | Oct 30, 2022 | Oct 31, 2021 | Oct 25, 2020 | Oct 27, 2019 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 24.91% | 29.14% | 26.68% | 19.53% | 17.61% |
| Return on assets (ROA) | 22.31% | 24.41% | 22.80% | 16.19% | 14.22% |
| Return on total capital | 36.47% | 44.34% | 39.59% | 27.49% | 27.12% |
| Return on equity (ROE) | 41.94% | 53.51% | 48.08% | 34.21% | 32.94% |
Applied Materials Inc.'s profitability ratios demonstrate the company's ability to generate earnings and returns for its stakeholders. Let's analyze the profitability ratios from the table provided.
1. Operating Return on Assets (Operating ROA):
- The operating ROA has exhibited a slight decline over the years, indicating a reduction in the company's operating income generated per dollar of assets employed. However, with an operating ROA of 24.91% in Oct 29, 2023, the company still demonstrates a strong ability to generate operating income relative to its asset base.
2. Return on Assets (ROA):
- The ROA, which measures the company's overall efficiency in generating profits from its assets, has also shown a similar decreasing trend. Despite this decline, the ROA of 22.31% in Oct 29, 2023, still reflects a robust performance in utilizing its assets to generate earnings.
3. Return on Total Capital:
- The return on total capital has displayed a decreasing trend, suggesting that the company's ability to generate returns from its total capital has softened. However, with a return on total capital of 34.77% in Oct 29, 2023, Applied Materials Inc. continues to deliver substantial returns in proportion to its total invested capital.
4. Return on Equity (ROE):
- The ROE reflects the company's ability to generate profits from the equity invested by shareholders. Applied Materials Inc. has consistently delivered high ROE, with a figure of 41.94% in Oct 29, 2023, signifying an exceptional ability to generate returns for its shareholders.
Overall, while there has been a slight decline in some of the profitability ratios over the years, Applied Materials Inc. continues to exhibit robust performance in generating returns from its assets, total capital, and equity. These ratios indicate a strong profitability and efficient utilization of resources, showcasing the company's ability to create value for its investors.