Apple Inc: Company Profile
Apple Inc. was established in January 3, 1977. The company manufactures and sells media devises, mobile communication, portable digital music players and personal computers. Apple also sells communication-relate software, services, networking solutions, accessories, applications and third-party digital content. The company has segments in the United States, Japan, Great China, Europe and Asia Pacific. The European segment is made up of India, European countries and Africa. China, Taiwan and Hong Kong make up the Great China while Australia and Asian countries are in the Asia Pacific region. Apple Inc. products include; iPhone, Mac, iPad, Apple TV, Apple watch, iPhone OS, watchOS, iCloud and Apple pay among a wide range of services, support and accessories.
Financials and Statistics
Apple Inc. has recorded an increase in revenue in the last three years, 2016-2018. In 2016, the revenue was $215,639,000, in 2017 the revenue was $229,234,000 and as at 9 September, 2018, the revenue was 265,595,000 ("Yahoo Finance: Apple Inc. (AAPL)", 2019). The increase in revenue could be attributed to an increase in research and development expenditure that has increased over the three years, from $10,045,000 in 2016 to 14,235,000 in 2018. The current assets have significantly increased from $106,869,000 in 2016 to $131,339,000 in 2018. The total assets increased from $321,686,000 to 365,725,000 in 2018, an increase of 13.69%. The total liabilities increased by 33.66% from $193,437,000 in 2016 to $258,578,000 in 2018.
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The current ratio in 2017 was 1.28 while in 2018 the ratio was 1.12. Although there was a decrease in the ratio, the company is able to offset its current liabilities with the current assets. The liquidity ratio is used to determine if a company can pay its short debts using the current assets. Retained earnings increased between 2016 and 2017 from $96,364,000 to $98,330,000, and decreased to $70,400,000 in 2018 ("Yahoo Finance: Apple Inc. (AAPL)", 2019). The decrease in retained earnings could be attributed to the increased in dividends paid to the shareholders. The dividends paid in 2017 were $12,769,000 while in 2018 the amount was $13,712,000. The decreases is retained earnings could have also been used to repurchase stock, and this can be explained by the decline in shareholders’ equity from $134,047,000 in 2017 to $107,147,000 in 2018.
Apple Inc. Financial Position
The book value of a company indicates the value of a company if it liquidates its assets and pays back its liabilities. The value also represents the value of particular assets on the company’s balance sheet. The value is calculated as total assets minus intangible assets and liabilities. In 2017, the book value was $134,047,000 and in 2018 the value was $107,147,000, indicating a decrease of 20.1%. The decrease in the book value indicates that the company’s net value decreased in 2018. For an investor, the earnings to equity ratio determine a company’s ability to generate profit using its assets. The ratio indicates how much each dollar of the shareholders’ equity generates. The ratio is important to investors as it indicates how efficiently the company will use the investors’ money. The ratio is calculated by dividing net income with shareholders’ equity (common stock). In 2017, the ratio was 1.3 and 1.48 in 2018. The ratios indicate that every dollar from common stock generates more than one dollar in profit.
Statistics and Trading Information
The following are statistics and trading information as indicated by Yahoo Finance: Apple Inc. (AAPL) (2019). The ticker symbol for Apple Inc. is AAPL, and the current share price is $153.31. The market capitalization is $725.13B, and the enterprise value is 789.56B. The trailing price to earnings ratio is 10.47. The forward annual dividend yield is 1.87% while the trailing annual dividend yield is 1.80%. Apple Inc. has a beta value of 1.3, which means there is a higher rate of rate and risk as well. The last stock split was in June 9th, 2014 and the split factor was 1 to 7. On January 9th, the stock closed at $153.31, on January 8th at $150.70, on January 7th at $147.93, on January 4th at $148.26 and on January 3rd at $142.19. The 52 Week High for Apple Inc. stock is $233.47. The book value per share is $22.53. The analysts are recommending a buying rate of 2.2. The average target price for Apple’s stock price is $218.78, with a low of $162.00 and a high of $300.00. The average revenue estimate for the year 2020 is $289.25B, with a low of $270B and a high of $362.36B.
Apple’s Big Announcements in 2018
During Apple’s fall event in 2018, the company announces that its Apple Watch line was the top in terms of sales, worldwide, and the company is looking to maintain the pace with Apple Watch Series 4. The new watch series is a major redesigning of the original Apple watch, and the new screens are 30% larger in surface area. The new series include a black ceramic and sapphire crystal back for the watches. Another major announces was the new iPhone X, which comes in golf, space gray and silver, and is water and dust resistance. Additionally, the glass used on the back of the phone is the strongest glass that has been used on a Smartphone. The company also launched iPhone Xr that offers the similar functionalities and capabilities but on a lower cost. The iPhone Xr is made of aluminum and comes in black, white, yellow, coral and red. Although the phone has an LCD screen instead of an OLED screen, it still has the tap to wake and no home button. The company also announced the release date of iOS 12 GM that was September 12th, 2018. The public version of macOS was released on September 12th, 2018. The company partnered with different providers such as Charter Spectrum to provide access to channel lineups through the Apple TV.
Value of Stock and Price to Earnings Ratio
The aim of every investor when purchasing stock is to get a deal that shows potential for higher returns. Apple’s price to earnings ratio and the stock price can be used to provide insight by indicating whether it is the right time to buy stock (Sincere, 2014). The stock price is the amount that an investor pays for one share. The price of shares fluctuates based on different market factors, for instance, if the demand for the stock increase, the prices will also increase. Similarly, if a company has been reporting negative earnings, the value of the stock will decrease and this will be indicated by a decrease in price. The price to earnings ratio shows the link between a company’s stock price and the earnings per share (Sincere, 2014). To get the prices to earnings ratio, the investors divides the current stock price with the earnings per share value. Alternatively, if the earnings per share value are not indicated, one can calculate the value using the dividends value, net income and outstanding shares.
In the case of Apple, the diluted earnings per share in 2018 were $11.91 and the current stock price is $153.31. Therefore, the price to earnings ratio becomes: $153.31/$11.91, which is $12.87. It is important to note that a company’s stock represents the value investors have placed on the stock, the price to earnings ratio indicate the amount investors have to pay for each dollar of the revenue. In the case of Apple, investors are willing to pay $12.87, which means hey are paying more to capture $1 of the earnings. The forward P/E ratio is $10.47, and this is calculated using the current share price and the predicted earnings per share. Since the value is lower than the current or trailing P/E ratio, there is expected increase in earnings (Sincere, 2014). The high price to P/E ratio means that the market believes that Apple Inc. is capable of significant growth. However, it is important for an investor to make a comparison with other companies in the industry to ensure that the stock is not overvalued.
Market Capitalization and Beta
Apple’s Market Capitalization is the value of the outstanding shares, calculated at the market value. For an investor, the market cap value represents a company’s size and the value of the company in the stock market. Large-cap companies have a market value of over $10B, mid-cap companies have between $2 to $10B and small-cap companies with less than $2B (Sincere, 2014). With market capitalization, an investor can compare the relative size of one company to another. Larger-cap companies are known to produce quality goods, have consistent dividend payments and indicate steady growth. The companies are dominant market players, whose brand names are known to national or international consumers. In the case of Apple Inc, the company procures high quality products and has shown steady growth in revenue and dividend payouts in the last three years.
The Beta value indicates the correlation between of a company’s stock to the whole market. The value is also used to determine volatility, a negative or positive correlation and the intensity of the correlation (Sincere, 2014). The Beta value enables an investor make the decision of whether to buy, hold or sell stock. A positive correlation indicates that stock value is moving with the overall market or the index it is measured against. A negative value indicates the stock is moving in the opposite direction of the market. In the current valuation, Apple Inc. has a Beta of 1.3 indicating that the stock is more volatile that the market. The value enables the investor to determine the level of returns and that the level of risk they are willing to take. The main aim of the Beta value is to measures the risk involved in particular stock. With Apple, the value of 1.3 means that the stock will move up or down 1.4 times the moves in the market. As an investor, the information prepares one for large profit or loss, and in some cases both. Based on the above analysis, I would recommend purchases apple’s stock. Although there the risks are high, there is a likelihood of getting higher returns.
References
Epstein, Z. (2018). The 5 most important announcements from Apple’s iPhone Xs event. Retrieved from https://bgr.com/2018/09/12/apple-event-2018-top-10-announcements/
Reuters Editorial. (2019). Apple Inc (AAPL.O) Company Profile. Retrieved from https://www.reuters.com/finance/stocks/company-profile/AAPL.O
Sincere, M. (2014). Understanding Stocks 2E (2nd ed.). McGraw-Hill.
Yahoo Finance: Apple Inc. (AAPL). (2019). Retrieved from https://finance.yahoo.com/quote/AAPL?p=AAPL
