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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
$889B
Market Cap
  1. Technology Hardware, Storage and Peripherals
Company description

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


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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 analysis.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?

  • The current share price of Apple is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
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 Avocados) 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?
  • Apple is overvalued based on earnings compared to the US Technology Hardware, Storage and Peripherals industry average.
  • Apple is good value based on earnings compared to the US market.
Price based on expected Growth
Does Apple's expected growth come at a high price?
  • Apple is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Apple's assets?
  • Apple is overvalued based on assets compared to the US Technology Hardware, Storage and Peripherals 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 Technology Hardware, Storage and Peripherals 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 Technology Hardware, Storage and Peripherals industry average (and greater than 0)? (1 check)
  5. Apple has a total score of 1/6, 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 (23.53%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage 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:
$208,270

Terminal Value

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

Terminal Value = $48,165 × (1 + 2.47%) ÷ (11.34% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$556,178

Present value of terminal value:
$324,998

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$533,268 = $208,270 + $324,998

Value = Total value / Shares Outstanding ($533,268 / 5,134)

Discount to Share Price

Value per share:
$103.86

Current discount (share price of $174.96): -68.45%



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 = 11.34% = 2.47% + (1.178 * 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). Note the market value of equity is used not the book value ($888,954,779,680).

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

1.178 = 1.08 (1 + (1- 30%) (13.01%))

Levered Beta used in calculation = 1.178



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  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 (7.53%) (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 34 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!
Annual Growth Rate
6.9%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Apple expected to grow at an attractive rate?
  • Apple's earnings growth is expected to exceed the low risk savings rate of 3.6%.
Growth vs Market Checks
  • Apple's earnings growth is positive but not above the US market average.
  • Apple's revenue growth is expected to exceed the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Apple's earnings are expected to grow by 6.9% yearly, however this is not considered high growth (20% yearly).
  • Apple's revenue is expected to grow by 7% yearly, however this is not considered high growth (20% yearly).
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 occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
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
  • Performance (ROE) is expected to be above the current US Technology Hardware, Storage and Peripherals 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 annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. 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 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings 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 (Technology Hardware, Storage and Peripherals).
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 year on year earnings growth rate has been positive on average over the past 5 years.
  • Apple's 1 year earnings growth is less than its 5 year annual average (5.9% vs 9.5%)
  • Apple's earnings growth has not matched the US Technology Hardware, Storage and Peripherals industry average in the past year (5.9% vs 12.5%).
Earnings and Revenue 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 > 20%) last year.
  • Apple performed above the US Technology Hardware, Storage and Peripherals industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (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 increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Technology Hardware, Storage and Peripherals industry? (1 check)
  3. Is the recent earnings growth over the last year 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 Net Income excluding extraordinary items 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 total short term assets, assets are 1.1x debt.
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.
  • Apple's level of debt (86.3% of total debt) compared to net worth is high (greater than 40%).
  • Historical 5 year debt data not available.
  • Total debt is well covered by annual operating cash flow (55%, greater than 20% of total debt).
  • Apple 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 company 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
1.44%
Current annual income from Apple dividends. Estimated to be 1.58% next year.
If you bought $2,000 of Apple shares you are expected to receive $0 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 below low risk savings rate (2.25%).
  • Paying below markets top dividend payers (3.18%).
Historical and Future Dividends
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 6 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 (3.9x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be well covered by net profit (4.1x 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 2/6, 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
AGE 56
TENURE AS CEO 6.3 years
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
  • Tim's compensation has been consistent with company performance over the past year.
  • Tim's compensation appears reasonable.
Management Team Tenure

Average tenure and age of the Apple management team in years:

4.7
Average Tenure
54.3
Average Age
  • The tenure for the Apple management team is about average.
Management Team

Tim Cook

TITLE
CEO & Director
COMPENSATION
$9M
AGE
56
TENURE
6.3 yrs

Luca Maestri

TITLE
Senior VP & CFO
COMPENSATION
$23M
AGE
53
TENURE
3.5 yrs

D. Sewell

TITLE
Senior VP
COMPENSATION
$23M
AGE
59
TENURE
8.2 yrs

Eddy Cue

TITLE
Senior Vice President of Internet Software & Services
COMPENSATION
$23M
AGE
53
TENURE
6.2 yrs

Dan Riccio

TITLE
Senior Vice President of Hardware Engineering
COMPENSATION
$23M
AGE
54
TENURE
5.3 yrs

Angela Ahrendts

TITLE
Senior Vice President of Retail
COMPENSATION
$23M
AGE
56
TENURE
3.5 yrs

Jeff Williams

TITLE
Chief Operating Officer
COMPENSATION
$24M
AGE
53
TENURE
1.9 yrs

Chris Kondo

TITLE
Senior Director of Corporate Accounting
TENURE
2.9 yrs

Kevin Lynch

TITLE
Vice President of Technology
AGE
50
TENURE
4.7 yrs

Nancy Paxton

TITLE
Senior Director of Investor Relations and Treasury
Board of Directors Tenure

Average tenure and age of the Apple board of directors in years:

6.9
Average Tenure
63.5
Average Age
  • The tenure for the Apple board of directors is about average.
Board of Directors

Art Levinson

TITLE
Chairman
COMPENSATION
$552K
AGE
67
TENURE
6 yrs

Tim Cook

TITLE
CEO & Director
COMPENSATION
$9M
AGE
56
TENURE
6.3 yrs

Andrea Jung

TITLE
Independent Director
COMPENSATION
$382K
AGE
58
TENURE
9.8 yrs

Ron Sugar

TITLE
Independent Director
COMPENSATION
$391K
AGE
68
TENURE
7 yrs

Bob Iger

TITLE
Independent Director
COMPENSATION
$377K
AGE
66
TENURE
6 yrs

Al Gore

TITLE
Independent Director
COMPENSATION
$352K
AGE
69
TENURE
14.8 yrs

Sue Wagner

TITLE
Independent Director
COMPENSATION
$352K
AGE
56
TENURE
3.3 yrs

James Bell

TITLE
Independent Director
COMPENSATION
$466K
AGE
68
TENURE
2.1 yrs
Recent Insider Trading
  • Apple insiders have only sold shares 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 0/6, 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

Company Info

Map
Description

Apple Inc. designs, manufactures, and markets mobile communication and media devices, and personal computers to consumers, and 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, as well as operating systems comprising iOS, macOS, watchOS, and tvOS. The company also provides 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 touch, a flash memory-based digital music and media player. Further, the company sells Apple-branded and third-party accessories, such as headphones, displays, storage devices, Beats products, and other connectivity and computing products and supplies. Additionally, it offers iCloud, a cloud service that stores music, photos, contacts, calendars, mail, documents, and others; AppleCare, which offers support options for its customers; and Apple Pay, a cashless 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: $888,954,779,680
Shares outstanding: 5,134,312,000
Website: http://www.apple.com
Address: Apple Inc.
1 Infinite Loop,
Cupertino,
California, 95014,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS AAPL Common Stock Nasdaq Global Select US USD 12. Dec 1980
DB APC Common Stock Deutsche Boerse AG DE EUR 12. Dec 1980
XTRA APC Common Stock XETRA Trading Platform DE EUR 12. Dec 1980
SWX AAPL Common Stock SIX Swiss Exchange CH CHF 12. Dec 1980
WBAG AAPL Common Stock Wiener Boerse AG AT EUR 12. Dec 1980
SNSE AAPL Common Stock Santiago Stock Exchange CL USD 12. Dec 1980
BVC AAPL Common Stock Bolsa de Valores de Colombia CO COP 12. Dec 1980
BMV AAPL * Common Stock Bolsa Mexicana de Valores MX MXN 12. Dec 1980
BVL AAPL Common Stock Bolsa de Valores de Lima PE USD 12. Dec 1980
BOVESPA AAPL34 BDR REPR 1/10 COM NPV Bolsa de Valores de Sao Paulo BR BRL 06. May 2011
BASE AAPL CEDEAR(REPR 1/10 SHR) (ARS) Buenos Aires Stock Exchange AR ARS 28. Aug 2012
Number of employees
Current staff
Staff numbers
123,000
Apple employees.
Industry
Industry: Technology Hardware, Storage and Peripherals
Sector: Technology Hardware and Equipment