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

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

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tokyo Electron	$12.33 billion	4.59	$2.51 billion	$3.75	16.38
Applied Materials	$27.64 billion	3.79	$7.18 billion	$7.65	16.86

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.

Dividends

Tokyo Electron pays an annual dividend of $1.26 per share and has a dividend yield of 2.1%. Applied Materials pays an annual dividend of $1.84 per share and has a dividend yield of 1.4%. Tokyo Electron pays out 33.6% of its earnings in the form of a dividend. Applied Materials pays out 24.1% 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.

Profitability

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

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

Risk & Volatility

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

Institutional and Insider Ownership

1.3% of Tokyo Electron shares are held by institutional investors. Comparatively, 80.6% of Applied Materials shares are held by institutional investors. 0.2% of Applied Materials shares are held 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.

Analyst Recommendations

This is a summary of current ratings and price targets for Tokyo Electron and Applied Materials, as reported by MarketBeat.

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

Applied Materials has a consensus price target of $214.67, indicating a potential upside of 66.46%. Given Applied Materials’ higher possible upside, analysts clearly believe Applied Materials is more favorable than Tokyo Electron.

Summary

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

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.

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.