After reading Apple Inc’s (NASDAQ:AAPL) most recent earnings announcement (30 June 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
How Well Did AAPL Perform?AAPL’s trailing twelve-month earnings (from 30 June 2018) of US$56.12b has jumped 20.3% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.4%, indicating the rate at which AAPL is growing has accelerated. How has it been able to do this? Let’s see whether it is only owing to an industry uplift, or if Apple has seen some company-specific growth.
The hike in earnings seems to be driven by a robust top-line increase outpacing its growth rate of costs. Though this brought about a margin contraction, it has made Apple more profitable. Viewing growth from a sector-level, the US tech industry has been growing its average earnings by double-digit 19.8% over the prior year, and a more subdued 8.5% over the last five years. This growth is a median of profitable companies of 24 Tech companies in US including Xerox, NetApp and Asetek. This means any tailwind the industry is benefiting from, Apple is able to amplify this to its advantage.In terms of returns from investment, Apple has invested its equity funds well leading to a 48.8% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15.3% exceeds the US Tech industry of 5.2%, indicating Apple has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Apple’s debt level, has declined over the past 3 years from 33.2% to 27.0%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 13.7% to 99.7% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Apple has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Apple to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AAPL’s future growth? Take a look at our free research report of analyst consensus for AAPL’s outlook.
- Financial Health: Are AAPL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.