Running head: APPLE COMPANY ANALYSIS1
Discussion Board 1
Company Analysis
Breanna Axelgard
Liberty University Online BUS530
APPLE COMPANY ANALYSIS 2
Apple was founded on April 1, 1976 in Cupertino California by Steve Jobs, Steve
Wozniak, and Ronald Wayne. They have acquired other companies like Beats Electronics and
FileMaker since. They carry a wide range of products including the familiar iPad, iPhone,
AppleWatch and Macintosh Computers. Currently they are the largest information technology
company by revenue.
Google
According to finance.google.com Apple has a Gross Profit Revenue of $53.26 billion.
Their net income however is $11.52 billion. They are up in net profit margin year over year by
12.66%. Their Net Change in Cash is concerning, they are at -$13.09 billion, which is down
483.36% year over year. Their actual cash on hand is $31.97 billion and this is up 17.64%. This
information is accurate for quarter 3 of 2018, and was retrieved on October 22, 2018.
Yahoo
According to finance.yahoo.com Apple’s (AAPL) current stock price is $220.65 per
share. This is accurate as of close 4pm EDT on October 22, 2018. Last year at this time it was
worth $176.57 per share of stock. It appears that over the past couple of years Apple’s stock has
risen and fallen pretty dramatically. Fluctuating over time varying hundreds of dollars. However,
it has steadily climbed to the $220.65 that it sits at now.
Reuters
According to Reuters.com Apple sales this year are down 7.73% and their dividend sits at
a solid just over 10% for the past three years. 5 years ago Apples sales % were 14.78% this is a
large contrast in comparison to their current -7.73%. However, Apple is still a leading competitor
within its industry. The industry ranks at 89 and Apple is at 99. There are 3,623 shareholders of
APPLE COMPANY ANALYSIS 3
AAPL and there are 2,967,317,025 shares held. This information is accurate as of October 23,
2018. In the last three months AAPL shares have gone down -3,730,745. Therefor, we can see
that Apple shareholders are selling off their shares. This could be a sign of a problem for a
business firm. It states that its earnings per share were 2.32 one year ago, and today is 2.77, for
the quarter ending Sep-18.
Industry Conditions
The following categories will be addressed for industry conditions relevant to Apple:
Growth Rates, Dividends, Financial Strength, Profitability Ratios, Valuation Ratios, Financial
Strength, Profitability Ratios, Efficiency, and Management Effectiveness.
DIVIDENDS
Company industry sector
Dividend Yield 1.62 1.62 1.50
Dividend Yield - 5 Year Avg 1.62 1.26 1.25
Dividend 5 Year Growth Rate -- 38.85 31.15
Payout Ratio(TTM) 26.54 19.54 21.70
GROWTH RATES
Company industry sector
Sales (MRQ) vs Qtr. 1 Yr. Ago 7.20 19.74 18.15
Sales (TTM) vs TTM 1 Yr. Ago 1.46 3.41 4.99
APPLE COMPANY ANALYSIS 4
Sales - 5 Yr. Growth Rate 14.78 4.14 4.96
EPS (MRQ) vs Qtr. 1 Yr. Ago 16.93 90.43 96.25
EPS (TTM) vs TTM 1 Yr. Ago 2.67 -- --
EPS - 5 Yr. Growth Rate 16.01 12.10 11.49
Capital Spending - 5 Yr. Growth Rate 12.70 2.22 3.09
FINANCIAL STRENGTH
Company industry sector
Quick Ratio (MRQ) 1.35 1.87 1.80
Current Ratio (MRQ) 1.39 2.26 2.27
LT Debt to Equity (MRQ) 67.86 1.65 9.42
Total Debt to Equity (MRQ) 81.81 8.79 17.24
Interest Coverage (TTM) -- -0.00 18.84
PROFITABILITY RATIOS
Company industry sector
Gross Margin (TTM) 38.51 43.17 40.25
Gross Margin - 5 Yr. Avg. 39.75 38.72 37.17
EBITD Margin (TTM) 31.41 -- --
EBITD - 5 Yr. Avg 34.01 22.94 21.39
Operating Margin (TTM) 26.84 17.83 14.99
APPLE COMPANY ANALYSIS 5
Operating Margin - 5 Yr. Avg. 30.01 13.81 12.63
Pre-Tax Margin (TTM) 27.90 18.84 16.07
Pre-Tax Margin - 5 Yr. Avg. 30.56 14.74 13.70
Net Profit Margin (TTM) 20.87 14.27 11.65
Net Profit Margin - 5 Yr. Avg. 22.65 11.52 10.26
Effective Tax Rate (TTM) 25.19 24.25 25.99
Effective Tax Rate - 5 Yr. Avg. 25.89 21.81 26.28
EFFICIENCY
Company industry sector
Revenue/Employee (TTM) 1,926,785 6,653 7,121,262
Net Income/Employee (TTM) 402,164 654 751,787
Receivable Turnover (TTM) 18.54 7.95 7.78
Inventory Turnover (TTM) 55.23 6.02 12.33
Asset Turnover (TTM) 0.69 0.82 0.82
MANAGEMENT EFFECTIVENESS
Company industry sector
Return on Assets (TTM) 14.34 11.63 10.32
Return on Assets - 5 Yr. Avg. 19.33 11.11 9.58
Return on Investment (TTM) 18.74 15.09 13.62
APPLE COMPANY ANALYSIS 6
Return on Investment - 5 Yr. Avg. 25.74 14.97 12.85
Return on Equity (TTM) 36.03 16.07 13.38
Return on Equity - 5 Yr. Avg. 37.80 15.90 12.91
www.reuters.com/fiance/stocks/financial-highlights/AAPL.OQ
Financial Position
Apple seems to be doing well despite a wide mix of data being presented from the
websites mentioned above. They have enough extra money on hand that they can get by in lower
profit times. They still have a profit margin every quarter and do not appear at risk for closing
stores.
Economic Outlook and Investment Decision
Looking at a study from Mikhail Simutin;
“The difference in returns of portfolios of high and low excess cash firms amounts to 5%
annually or 6% after standard three‐factor risk adjustment. Firms with more excess cash
have higher market betas and earn lower returns during market downturns. High excess
cash companies invest considerably more in the future than do their low cash peers, but
do not experience stronger future profitability. On the whole, this evidence is consistent
with the notion that excess cash holdings proxy for risky growth options,” (Stimutin,
2010, p. 1197).
Based on his findings the economic outlook for Apple should not take into consideration their
cash on hand, which was one of their greatest factors in regards to economic outlook and
whether a person should invest or not. Additionally, Ball, Gerakos, Linnainmaa, and Nikolaev
APPLE COMPANY ANALYSIS 7
write, “An investor can increase a strategy’s Sharpe ratio more by adding just a cash-based
operating profitability factor to the investment opportunity set than by adding both an accruals
factor and a profitability factor that includes accruals,” (Ball et al., 2016, p. 28).
Apple has many factors that are far above the industry it competes in. However, it
appears that they also have some concerning numbers. Their profitability ratios are lower than
the industry in Gross Margin, their overall financial strength is lower as well, and their growth
rates are lower. These three things do not necessarily mean trouble for the company, but it could
be an indicator of a red flag for investment decisions. With the stock price per share being so
high, I would not choose to invest in AAPL. If their stock lowered to $150-175 per share, than I
would choose to purchase in hopes that they rise again. Having have worked in the technology
industry for 10 years, I have been privy to rumors and interviews conducted for Apple. Apple
leaders have mentioned that they are no longer concerned with their number one products, i.e,
iPhone, and iPad. They are hoping to venture into the automotive and medical field. This is risky
in the sense that what has made the largest margin of their profits are declining, yet this might
also be a good thing for future investors because if successful, the automotive and medical
industry have a lot higher return on investment and profit margins.
APPLE COMPANY ANALYSIS 8
References
Ball, R., Gerakos, J., Linnainmaa, J., & Nikolaev, V. (2016). Accruals, cash flows, and operating
profitability in the cross section of stock returns. Journal Of Financial Economics, 121(1),
28-45. doi: 10.1016/j.jfineco.2016.03.002
Simutin, M. (2010). Excess Cash and Stock Returns. Financial Management, 39(3), 1197-1222.
doi: 10.1111/j.1755-053x.2010.01109.x
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