Weekend Stock Analysis: AAPL

This weekend the following stock is going to be examined through a fundamental lens: AAPL. The areas of fundamental analysis are Growth, Value, Profitability and Cash Flow. 

AAPL stats compared with competitors

	EPS	P/E	ROE '12	ROE '13	ROA '12	ROA '13
AAPL	41.9	10.63	42.84%	29.14%	28.54%	19.60%
DELL	1 .06	12.54	24.21%	4.87%	5.15%	1.13%
HPQ	-6.8	n/a	-41.43%	18.61%	-10.62%	4.06%
MSFT	1.94	17.66	27.51%	32.54%	14.77%	18.48%

Growth for Apple has been impressive, beating analysts expectations by an average of 8.60% in the last six reports. Total revenue clocked in at $169.07 billion by the end of the last twelve months, an increase of more than 256% from the same duration of time three years ago where profits posted were $47.38 billion. The upcoming reports will be important to watch as the remarkable growth displayed suggests that it is gaining market shares from rivals. Sales were up 12.11% from the same quarter last year One sign of potential weakness came in a yearly drop in last quarters profit as compared to the quarter of last year, but monitoring the upcoming reports will be the only way to truly gauge the growth. Stock price rose by 0.55% after beating analysts expectations on April 24th, 2013. The next earnings report is set to be released in July. Growth was overall given a grade of a B from www.marketgrader.com, helped by a strong EPS and hindered by a less than average short term market growth as well as a medium growth potential.
 
Value is high for Apple, as stock price is relatively cheap given the EPS growth rate in the past two years. Borrowing the indicator from www.marketgrader.com, the calculation at the twelve month period end of each quarter for the past two years is for the company's annualized growth rate, which is then used to compute the company's "optimum" P/E, which show a strong 41.30% annual growth rate. Trailing twelve month P/E is 10.55 and the forwards P/E is 10.96 which is still lower than the S&P 500's 15.20 forward P/E. According to www.marketgrader.com, "Investors therefore see more value in the company's future earnings but not as much as they see in the market in general; coupled with the company's strong fundamentals, this situation could represent an interesting but risky opportunity, meaning short term volatility with the possibility of handsome returns in the long term."

Profitability is one of the strongest areas for Apple, as in the last four quarters Apple earned a profit of $39.67 billion. This profit equates to 23.46% of its sales for the period. Operating income "represents a company's earnings from its normal operations before any so-called non-operating income and/or costs such as interest expense, taxes and special items" (taken from www.investopedia.com). The operating income of Apple accounted for 30.90% of its sales in the last four quarters, more than three times the average operating income of the Computer Processing Hardware industry (7.10%). As the chart above says, the Return on Equity decreased from 37.68% to 29.28%, still a respectable amount. One of the most important qualities of Apple as a company is the total lack of debt while sitting pretty on cash reserves. 

Cash Flow up until the most recent quarter was up 4.12% compared to the same period a year earlier. Most recently the cash flow declined by 10.54% to $12.50 billion, which is the only speed bump in an otherwise spectacular financial position the company is in. According to its twelve month trailing operating income 38.56% returns were made on $135.49 billion of invested capital. The after tax cost of equity came out to 7.22%, resulting in an EVA of 31.34%. EVA, or economic value added, is the calculation of what profits remain after the cost of a company's capital, both equity and debt, are subtracted from operating profit. Along with a recent hike in the dividends paid out by Apple from $2.65 to $3.05 as of the reporting quarter on December 31, 2012 the total dividend payout amounted to $10.34 billion for the year, which at 18.71% of cash flow is healthy.