Applied Materials, Inc. (NASDAQ: AMAT) stock has been on a tear this year, up 40% since January. AMAT isn’t a chipmaker, rather it makes the equipment that chipmakers and others tech OEMs — display, solar, WEB coatings, etc — use to make their products. It’s the pick and shovel arm to the company’s gold mining operations.

And when times are good, like they have been in recent quarters, they’re very good. But the trick to investing in this sector is watching the cycle. When the cycle swings up, it’s a great ride. But when the cycle starts to decline, you want to jump off the ride fast.

Generally speaking, this means you always have to be somewhat contrarian – when times are bad, you want to look for an entry point since it won’t last. And when times are good, you need to start thinking about an exit strategy.

Early last month, AMAT announced its FY Q3 numbers and they were very good. Profits were up nearly 70% year over year; earnings growth was up 68%; revenue was up 33%.

But if you look at AMAT stock’s chart, you don’t see much enthusiasm when the numbers were released. The answer to this disconnect lies in the fact that at the same earnings release, AMAT lowered guidance for Q4.

While AMAT stock wasn’t punished for lowering guidance, part of the reason it hasn’t soared higher on its impressive numbers is that analysts know the Q4 is usually the slowest quarter of the year and that this kind of up and down is typical in this cyclical industry.

The question is, whether this is beginning of the end of this cycle or just a lull.

Some of its cyclicality is reflected in its PE. After a nearly 40% run year to date, AMAT stock is still trading at a current PE of 15. Its PEG ratio (price to earnings growth) is also tantalizingly low. Investors expect a that up is always followed by down, so there’s a tempered enthusiasm for the stock.

But what isn’t widely observed is AMAT’s focus on flattening out some of its volatility. That is what its display division is all about.

Bottom Line for AMAT Stock

Right now, there is shift going with display makers – phones, TVs, monitors, cars, etc – from LED (light emitting diodes) to higher resolution, lower power consumption OLEDs (organic light emitting diodes). And AMAT is one of the leading companies in this transition.

This will be a multi-year trend according to research consulting group Technavio. It expects the OLED market to grow at a compounded annual growth rate (CAGR) of 22% through 2021. A report from UBI Research projects that the OLED market will hit $89 billion by 2020.

This kind of long-term growth would do a lot to help AMAT stay on a steady growth track and help AMAT stock keep its strong upward path.