Critical Analysis: Tokyo Electron (OTC:TOELY) vs. Applied Materials (NASDAQ:AMAT)

Applied Materials (NASDAQ:AMAT) and Tokyo Electron (OTC:TOELY) are both large-cap computer and technology companies, but which is the better business? We will compare the two companies based on the strength of their profitability, analyst recommendations, dividends, earnings, risk, valuation and institutional ownership.

Risk and Volatility

Applied Materials has a beta of 1.61, indicating that its stock price is 61% more volatile than the S&P 500. Comparatively, Tokyo Electron has a beta of 1.67, indicating that its stock price is 67% more volatile than the S&P 500.

Profitability

This table compares Applied Materials and Tokyo Electron’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Applied Materials	22.95%	39.50%	22.12%
Tokyo Electron	22.63%	28.75%	20.52%

Analyst Ratings

This is a summary of current ratings and recommmendations for Applied Materials and Tokyo Electron, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Applied Materials	1	5	17	0	2.70
Tokyo Electron	0	0	0	1	4.00

Applied Materials currently has a consensus target price of $214.67, suggesting a potential upside of 69.10%. Given Applied Materials’ higher probable upside, equities analysts plainly believe Applied Materials is more favorable than Tokyo Electron.

Earnings & Valuation

This table compares Applied Materials and Tokyo Electron”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Applied Materials	$27.64 billion	3.73	$7.18 billion	$7.65	16.59
Tokyo Electron	$12.33 billion	4.53	$2.51 billion	$3.75	16.18

Applied Materials has higher revenue and earnings than Tokyo Electron. Tokyo Electron is trading at a lower price-to-earnings ratio than Applied Materials, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

80.6% of Applied Materials shares are owned by institutional investors. Comparatively, 1.3% of Tokyo Electron shares are owned by institutional investors. 0.2% of Applied Materials shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Applied Materials pays an annual dividend of $1.84 per share and has a dividend yield of 1.4%. Tokyo Electron pays an annual dividend of $1.26 per share and has a dividend yield of 2.1%. Applied Materials pays out 24.1% of its earnings in the form of a dividend. Tokyo Electron pays out 33.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Applied Materials beats Tokyo Electron on 12 of the 17 factors compared between the two stocks.

About Applied Materials

Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The Semiconductor Systems segment develops, manufactures, and sells various manufacturing equipment that is used to fabricate semiconductor chips or integrated circuits. This segment also offers various technologies, including epitaxy, ion implantation, oxidation/nitridation, rapid thermal processing, physical vapor deposition, chemical vapor deposition, chemical mechanical planarization, electrochemical deposition, atomic layer deposition, etching, and selective deposition and removal, as well as metrology and inspection tools. The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity comprising spares, upgrades, services, remanufactured earlier generation equipment, and factory automation software for semiconductor, display, and other products. The Display and Adjacent Markets segment offers products for manufacturing liquid crystal displays; organic light-emitting diodes; and other display technologies for TVs, monitors, laptops, personal computers, electronic tablets, smart phones, and other consumer-oriented devices. It operates in the United States, China, Korea, Taiwan, Japan, Southeast Asia, and Europe. The company was incorporated in 1967 and is headquartered in Santa Clara, California.

About Tokyo Electron

Tokyo Electron Limited, together with its subsidiaries, develops, manufactures, and sells semiconductor and flat panel display (FPD) production equipment in Japan, Europe, North America, Taiwan, China, South Korea, Southeast Asia, and internationally. The company offers coaters/developers, etch systems, surface preparation systems, deposition systems, test systems, wafer bonders/debonders, wafer edge trimming, SiC epitaxial CVD systems, gas cluster ion beam system, and cleaning systems. It also provides plasma etch/ash systems for use in the manufacture of FPDs, as well as inkjet printing systems for manufacturing OLED displays. In addition, the company offers delivery, facility management, and non-life insurance services; sells semiconductor products, board computer products, software, and other electronic components; sells and supports network/storage/middleware related solutions; and develops, manufactures, and sells magnetic annealing systems. Tokyo Electron Limited was incorporated in 1951 and is headquartered in Tokyo, Japan.