Applied Materials Inc (AMAT)

Return on equity (ROE)

		Oct 29, 2023	Oct 30, 2022	Oct 31, 2021	Oct 25, 2020	Oct 27, 2019
Net income	US$ in thousands	6,856,000	6,525,000	5,888,000	3,619,000	2,706,000
Total stockholders’ equity	US$ in thousands	16,349,000	12,194,000	12,247,000	10,578,000	8,214,000
ROE		41.94%	53.51%	48.08%	34.21%	32.94%

October 29, 2023 calculation

ROE = Net income ÷ Total stockholders’ equity
= $6,856,000K ÷ $16,349,000K
= 41.94%

Return on equity (ROE) is a key financial ratio that measures a company's profitability by evaluating how effectively it generates profit from shareholders' equity. Let's analyze Applied Materials Inc.'s ROE over the past five years to understand its financial performance and the ability to generate profits from the shareholders' investments.

In 2019, Applied Materials Inc.'s ROE was 32.94%, reflecting that the company generated $0.3294 in profit for every dollar of shareholders' equity. This indicates a moderate profit generation capability.

Subsequently, in 2020, the ROE improved to 34.21%, suggesting that the company was able to enhance its profit generation from the shareholders' equity. This improvement indicates a positive performance in utilizing the shareholders' investments to generate profits.

The upward trend in ROE continued in 2021, reaching 48.08%, signifying a substantial increase in the profitability attributed to shareholders' equity. This strong improvement suggests that Applied Materials Inc. effectively increased its profit generation capability, which could result from increased profitability, efficient use of assets, or improved financial leverage.

In 2022, the ROE further increased to 53.51%, indicating a significant rise in the company's ability to generate profits from the shareholders' equity. This considerable improvement reflects positively on the company's financial management and operational efficiency.

Lastly, in 2023, the ROE decreased to 41.94%, but still remained at a high level, showcasing that the company continues to generate significant returns for shareholders.

In summary, Applied Materials Inc.'s ROE has shown a positive trend over the past five years, reflecting the company's ability to effectively utilize shareholders' equity to generate profits. The steady improvement in ROE suggests strong financial management, operational efficiency, and increased profitability, all of which are favorable indicators of the company's financial health and performance.