Loading...

Apple

Nasdaq:AAPL
Snowflake Description

Acceptable track record with moderate growth potential.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
AAPL
Nasdaq
$631B
Market Cap
Technology Hardware, Storage and Peripherals
Company description

Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, and education, enterprise, and government customers worldwide. More info.


Add to Portfolio Compare Print Invest
SHARE PRICE
3 Month History
AAPL
Industry
5yr Volatility vs Market

Value

 Is Apple undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Apple to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

Current Discount
Amount off the current price Apple is available for.
Intrinsic value
7%
Share price is $120 vs Future cash flow value of $129.08
Current Discount Checks
For Apple to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
  • Apple's share price is below the future cash flow value, but not at a significant discount (< 20%).
  • Apple's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Apple's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Apple's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Good value based on earnings compared to the Tech industry average.
  • Good value based on earnings compared to the overall market.
Price based on expected Growth
Does Apple's expected growth come at a high price?
  • Poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Apple's assets?
  • Overvalued based on assets compared to the Tech industry average.
X
Value checks
We assess Apple's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Tech industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Tech industry average (and greater than 0)? (1 check)
  5. Apple has a total score of 2/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (7.37%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Free cash flow to Equity)

The calculations below outline how an intrinsic value for Apple is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$196,168

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $43,615 × (1 + 2.5%) ÷ (8.6% – 2.5%)

Terminal value based on the Perpetuity Method where growth (g) = 2.5%:
$728,932

Present value of terminal value:
$482,520

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value

Value = Total value / Shares Outstanding ($678,688 / 5,258)

Value per share:
$129.08

Current discount (share price of $120): 7%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.6% = 2.47% + (0.814 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.814 = 0.743 (1 + (1- 30%) (13.8%))

Levered Beta used in calculation = 0.814



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in United States.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Apple expected to perform in the next 1 to 3 years based on estimates from 42 analysts?

    The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

    Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
    3 year growth
    24%
    Expected earnings growth over 3 years.
    Future Earnings growth analysis
    Is Apple expected to grow at an attractive rate? We look at the 1 year and 3 year growth below.

    Are Apple's annual earnings growth expected to exceed 3.6% over the next 3 years?

    • After 1 year
    • After 3 years
    1 & 3 year estimated growth in earnings
    Past and Future Earnings per Share
    The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
    Analysts growth expectations
    2 year growth check
    Super high growth metrics x1.5?

    Which of the these is expected to increase by over 50% in 2 year's time?

    • Revenue
    • Cash flow
    • Profit
    Performance in 3 years
    In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
    • Apple is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

    Improvement & Relative to industry
    • Expected to be above the Tech industry average.
    • A decline in Apple's performance (ROE) is expected over the next 3 years.
    X
    Future performance checks
    We assess Apple's future performance by looking at:
    1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
    2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
    3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
    4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
    5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
    Some of the above checks will fail if the company is expected to be loss making in the relevant year.
    Apple has a total score of 3/6, see the detailed checks below.

    Note: If no +3 year data is available, +2.5 year data may be used.

    Note 2: We use GAAP per Share in all our calculations.

    Full details on the Future part of the Simply Wall St company analysis model.

    Past Performance

     How has Apple performed over the past 5 years?

    The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
    Past earnings growth
    Below we compare Apple's growth in the last year to its industry (Tech).
    Past Earnings growth analysis
    We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
    • Apple's earnings growth has not matched the industry average in the past year.
    • Apple's 1 year earnings growth is negative.
    • Apple has delivered strong earnings growth in the past 5 years.
    Profit History
    Apple's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
    Performance last year
    We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
    • Strong return on shareholders funds (ROE) last year.
    • Apple performed above the Tech industry average based on return on assets (ROA) last year.
    • Performance based on revenue producing assets (ROCE) has been diminishing over 3 years.
    X
    Past performance checks
    We assess Apple's performance over the past 5 years by checking for:
    1. Has earnings per share (EPS) increased in past 5 years? (1 check)
    2. Has the EPS growth in the last year exceeded that of the Tech industry? (1 check)
    3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
    4. Is the Return on Equity (ROE) higher than 20%? (1 check)
    5. Is the Return on Assets (ROA) above industry average? (1 check)
    6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
    The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
    Apple has a total score of 3/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations.

    Full details on the Past part of the Simply Wall St company analysis model.

    Health

     How is Apple's financial health and their level of debt?

    A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

    The boxes below represent the relative size of what makes up Apple's finances.

    The net worth of a company is the difference between its assets and liabilities.
    Net Worth
    • Apple is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
    • Apple's long term commitments exceed its cash and other short term assets.
    Balance sheet
    This treemap shows a more detailed breakdown of Apple's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
    Assets
    Liabilities and shares
    The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
    • Low level of unsold assets
    • Total debt is covered by short term assets.
    Historical Debt
    Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

    The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

    If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
    • The level of debt (68%) compared to net worth is high (greater 40%).
    • The level of debt compared to net worth has increased over the past 5 years (0% vs 68% today).
    • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
    • Company earns more interest than it pays.
    X
    Financial health checks
    We assess Apple's financial health by checking for:
    1. Are short term assets greater than short term liabilities? (1 check)
    2. Are short term assets greater than long term liabilities? (1 check)
    3. Has the debt to equity ratio increased in the past 5 years? (1 check)
    4. Is the debt to equity ratio over 40%? (1 check)
    5. Is the debt covered by short term assets? (1 check)
    6. Are earnings greater than 5x the interest on debt (if comapany pays interest at all)? (1 check)
    7. Apple has a total score of 3/6, see the detailed checks below.


    Full details on the Health part of the Simply Wall St company analysis model.

    Dividends

     What is Apple's current dividend yield, its reliability and sustainability?

    Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
    Annual Dividend Income
    Dividend payments
    1.91%
    Current annual income from Apple dividends. Estimated to be 2.11% next year.
    If you bought $2,000 of Apple shares you are expected to receive $38 in your first year as a dividend.
    Dividend Amount
    Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
    • Paying above low risk savings rate. (1.75%)
    • Paying below the markets top dividend payers. (3.18%)
    Historical dividend yield
    It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

    We also check to see if the dividend has increased in the past 10 years.
    • Whilst dividend payments have been stable, Apple has been paying a dividend for less than 10 years.
    • Dividend payments have increased, but Apple only paid a dividend in the past 4 years.
    Current Payout to shareholders
    What portion of Apple's earnings are paid to the shareholders as a dividend.
    • Dividends paid are well covered by net profit (3.7x coverage).
    Future Payout to shareholders
    • Dividends after 3 years are expected to be well covered by net profit (3.8x coverage).
    X
    Income/ dividend checks
    We assess Apple's dividend by checking for:
    1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
    2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
    3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
    4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
    5. How sustainable is the dividend, can Apple afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
    6. Apple has a total score of 3/6, see the detailed checks below.


    Full details on the Dividends part of the Simply Wall St company analysis model.

    Management

     What is the CEO of Apple's salary, the management and board of directors tenure and is there insider trading?

    Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
    CEO
    Tim Cook, image provided by Google.
    Tim Cook
    COMPENSATION$8,747,719
    AGE56
    CEO Bio

    Mr. Timothy D. Cook, also known as Tim, has been the Chief Executive Officer of Apple Inc. since August 24, 2011. Mr. Cook served as the Chief Operating Officer of Apple Inc., from October 14, 2005 to August 24, 2011. He was responsible for all of Apple's worldwide sales and operations, including end-to-end management of Apple’s supply chain, sales activities and service and support in all markets and countries. He also headed Apple’s Macintosh division and played a key role in the continued development of strategic reseller and supplier relationships, ensuring flexibility in response to an increasingly demanding marketplace. Mr. Cook served as an Executive Vice President of Worldwide Sales & Operations of Apple Inc. from 2002 to 2005. He joined Apple in 1998 as Senior Vice President of worldwide operations. He served as Vice President of Corporate Materials of Compaq Computer Corporation from 1997 to 1998 and was responsible for procuring and managing its product inventory. Previous to his work at Compaq Computer Corporation, he served as Chief Operating Officer of the Reseller Division of Intelligent Electronics. Mr. Cook also spent 12 years with IBM, served as Director of North American Fulfillment, where he led manufacturing and distribution functions for IBM's Personal Computer Company in North and Latin America. He has been a Director of Apple Inc. since August 24, 2011. He has been an Independent Director of Nike, Inc. since November 2005 and has been its Lead Independent Director since June 30, 2016. He serves as a Director of Robert F. Kennedy Center for Justice & Human Rights. Mr. Cook studied an MBA from Duke University, where he was a Fuqua Scholar and a Bachelor of Science Degree in Industrial Engineering from Auburn University.

    CEO Compensation
    • CEO's compensation has been consistent with company performance over the past year.
    • CEO's compensation appears reasonable.
    Management Team Tenure

    Average tenure of the Apple management team:

    Management tenure
    3.9 years
    • The tenure for the Apple management team is about average.
    Management Team

    Tim Cook

    TITLE
    Chief Executive Officer and Director
    COMPENSATION
    $8,747,719
    AGE
    56

    Luca Maestri

    TITLE
    Chief Financial Officer and Senior Vice President
    COMPENSATION
    $22,803,569
    AGE
    53

    D. Sewell

    TITLE
    Senior Vice President
    COMPENSATION
    $22,807,544
    AGE
    59

    Eddy Cue

    TITLE
    Senior Vice President of Internet Software & Services
    COMPENSATION
    $22,807,544
    AGE
    53

    Dan Riccio

    TITLE
    Senior Vice President of Hardware Engineering
    COMPENSATION
    $22,807,544
    AGE
    54

    Angela Ahrendts

    TITLE
    Senior Vice President of Retail
    COMPENSATION
    $22,902,892
    AGE
    56
    Board of Directors Tenure

    Average tenure of the Apple board of directors:

    Board tenure
    8 years
    • The tenure for the Apple board of directors is about average.
    Board of Directors

    Art Levinson

    TITLE
    Chairman
    COMPENSATION
    $552,379
    AGE
    67

    Tim Cook

    TITLE
    Chief Executive Officer and Director
    COMPENSATION
    $8,747,719
    AGE
    56

    Andrea Jung

    TITLE
    Independent Director
    COMPENSATION
    $382,191
    AGE
    58

    Ron Sugar

    TITLE
    Independent Director
    COMPENSATION
    $390,522
    AGE
    68

    Bob Iger

    TITLE
    Independent Director
    COMPENSATION
    $377,289
    AGE
    66

    Al Gore

    TITLE
    Independent Director
    COMPENSATION
    $352,492
    AGE
    69
    Recent Insider Trading
    • Apple insiders have sold more shares than they have bought in the past 3 months.
    Who owns this company?
    X
    Management checks
    We assess Apple's management by checking for:
    1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
    2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
    3. Is the average tenure of the management team less than 2 years? (1 check)
    4. Is the average tenure of the board of directors team less than 3 years? (1 check)
    5. Apple has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


    Note: We use the top 6 management executives and board members in our calculations.

    Note 2: Insider trading include any internal stakeholders and these transactions.

    Full details on the Management part of the Simply Wall St company analysis model.

    Company News

    Articles
    Announcements

    Company Info

    Description

    Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, and education, enterprise, and government customers worldwide. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications. It offers iPhone, a line of smartphones; iPad, a line of multi-purpose tablets; and Mac, a line of desktop and portable personal computers. The company also provides iLife, a consumer-oriented digital lifestyle software application suite; iWork, an integrated productivity suite that helps users create, present, and publish documents, presentations, and spreadsheets; and other application software, such as Final Cut Pro, Logic Pro X, and FileMaker Pro. In addition, it offers Apple TV that connects to consumers’ TV and enables them to access digital content directly for streaming high definition video, playing music and games, and viewing photos; Apple Watch, a personal electronic device; and iPod, a line of portable digital music and media players. Further, the company sells Apple-branded and third-party Mac-compatible, and iOS-compatible accessories, such as headphones, displays, storage devices, Beats products, and other connectivity and computing products and supplies. Additionally, it offers iCloud, a cloud service; AppleCare that offers support options for its customers; and Apple Pay, a mobile payment service. The company sells and delivers digital content and applications through the iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store, and Apple Music. It also sells its products through its retail and online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. Apple Inc. was founded in 1977 and is headquartered in Cupertino, California.

    Details
    Name:Apple Inc.
    Ticker:AAPL
    Exchange:NasdaqGS
    Founded:1977
    Market Cap:$630,938 million
    Website:http://www.apple.com
    Listings
    Map

    1 Infinite Loop, Cupertino, 95014, United States

    Number of employees
    Street

    Current staff
    Staff numbers
    116,000
    Apple employees.
    Industry
    Industry:Technology Hardware, Storage and Peripherals
    Sector:Technology Hardware and Equipment