Applied Materials The Motley Fool Take

Shares of semiconductor equipment-maker Applied Materials (Nasdaq: AMAT) have been bouncing around lately, even after the company delivered some good news.

At the headline level, you'd be hard-pressed to call the company's fiscal 2008 anything but a poor performance. Sales plummeted 16 percent for the year. The operating margin shed around 8 percentage points to end at 16.4 percent. And the diluted earnings per share plunged about 42 percent.

But consider this: In the final quarter of Applied Materials' fiscal year, sales amounted to just $2.04 billion. But the company took in new orders of $2.21 billion. The backlog of work to be done now stands at $4.85 billion — 33 percent higher than at the end of the last fiscal year, implying future sales growth.

Furthermore, heading into fiscal 2009, Applied Materials' CEO promised to "implement further cost-reduction actions" that could produce annual savings of as much as $400 million — thus answering the unvoiced rhetorical question: What goes great with better sales? Improved profit margins.

Need we say it? Trading with a priceto earnings (P/E) ratio of around 12, with analysts predicting 10 percent long-term profit growth over the next half decade and backlog trends supporting these growth predictions, Applied Materials looks cheap. If you're still skittish, add it to your watch list and consider buying it on a further drop.