On November 29, 2023, Apple Inc (AAPL, Financial) exhibited no change in its stock price, maintaining stability at $190.4 per share. Despite this steadiness, the company has experienced a 5.81% gain over the past three months. With an impressive Earnings Per Share (EPS) of 6.12, investors are keen to understand whether Apple (AAPL) is currently fairly valued. This article delves into the valuation analysis of Apple, providing readers with a clear understanding of the stock's intrinsic value.
Company Introduction
Apple Inc (AAPL, Financial) designs, manufactures, and markets a broad range of consumer electronics, including the iPhone, iPad, Mac, Apple Watch, and AirPods. The tech giant also offers a suite of services such as Apple Music, iCloud, Apple Care, and Apple Pay. Known for its seamless integration of hardware, software, and services, Apple has established a robust online presence and retail distribution through both company-owned stores and third-party retailers. With a current stock price of $190.4 and a market cap of $3 trillion, Apple stands as a significant player in the tech industry. The question at hand is whether the stock's price aligns with its GF Value, an estimate of its fair market value.
Summarize GF Value
The GF Value is a unique metric that determines the intrinsic value of a stock based on historical trading multiples, an adjustment factor reflecting the company's past performance, and estimated future business outcomes. According to the GF Value Line, Apple (AAPL, Financial) appears to be fairly valued, suggesting that the stock price should hover around this line. A price significantly above the GF Value Line indicates an overvalued stock with potentially poorer future returns, whereas a price below suggests a higher potential for future returns. Apple's market cap of $3 trillion and its current price point suggest that the stock is trading at a fair value, aligning with the GF Value estimate of $176.91.
Because Apple is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoiding permanent capital loss. Apple's cash-to-debt ratio of 0.55 ranks in the lower percentile of its industry, yet GuruFocus awards Apple a financial strength rating of 7 out of 10, indicating a reasonably healthy balance sheet.
Profitability and Growth
Profitable companies, particularly those with long-term consistency, are typically less risky investments. Apple has been profitable for the last decade, with a revenue of $383.30 billion and an Earnings Per Share (EPS) of $6.12 over the past twelve months. Its operating margin of 29.82% is exceptionally high, placing it above 97.88% of its industry peers. The company's profitability is rated a perfect 10 out of 10.
When it comes to growth, Apple's average annual revenue growth is 15.7%, ranking well within its industry. The 3-year average EBITDA growth rate of 20.9% also demonstrates the company's strong growth trajectory.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. Apple's ROIC of 32.86 far exceeds its WACC of 11.46, indicating the company is creating significant value for shareholders.
Conclusion
In conclusion, Apple (AAPL, Financial) presents as a stock that is fairly valued. The company's financial condition is solid, and its profitability is robust. Its growth outperforms 67.14% of its peers in the Hardware industry. For a deeper understanding of Apple's financial health, one can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
