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Apple (NASDAQ: AAPL) will be the stock in focus: (Price at time of writing: $117.06 as 21 October 2016)
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Background and overview of Apple (AAPL)
For those who do not know Apple, the question is where have you been the past 15 years? Apple is famous for their electronic devices such as their Apple Mac laptop computers. But the device that was the real breakthru for Apple as company was the Apple Iphone. It is one of the best selling mobile devices in history. Apple not only focusses on phones and laptops. Their product range includes:
Apple is listed on the NASDAQ stock exchange
- Mac
- iPad
- iPhone
- Apple Watch
- Apple TV
- Apple Music (and offcourse the music download service called iTunes)
Apple is listed on the NASDAQ stock exchange
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Scroll over or click on the funnel chart to get more details of AAPL's latest financial results (3rd quarter ending June 2016)
Financial review:
Apple is sitting on a net profit margin of 18.4%. So essentially for every $100 they receive they make $18.4 in profits after paying all expenses and taxes. Pretty strong net profit margins considering the competitive environment they operate in with competition from the likes of Samsung. But one would assume the recall of the S7 will have a positive effect on Apple as people shy away from buying the S7 due to it's battery problems and rather go for the iPhone.
Diluted earnings per share came in at $1.42 a share for the quarter. This places AAPL on a PE ratio of 14.5 (assuming the last quarter of the fiscal year's earnings will be the same as that of quarter 3). The PE is not very demanding for a company with such a strong brand name and customer loyalty. AAPL is currently sitting on a dividend yield of 1.86% (assuming the last quarter of the fiscal year's dividend will be the same as that of quarter 3). Investors are not likely to invest in AAPL if they are looking for strong dividend payouts as the yield is pretty low.
Diluted earnings per share came in at $1.42 a share for the quarter. This places AAPL on a PE ratio of 14.5 (assuming the last quarter of the fiscal year's earnings will be the same as that of quarter 3). The PE is not very demanding for a company with such a strong brand name and customer loyalty. AAPL is currently sitting on a dividend yield of 1.86% (assuming the last quarter of the fiscal year's dividend will be the same as that of quarter 3). Investors are not likely to invest in AAPL if they are looking for strong dividend payouts as the yield is pretty low.
Cash generated by operating activities for the 9 months (all three quarters of the fiscal year) amounted to $49,698million (or roughly $9 a shares). That makes it about $3 a share in cash generated from operating activities per quarter. Showing AAPL is a strong cash generative business. At the end of the 9months their cash and equivalents on their balance sheet was $18,237million
Pie chart shows revenue earned per region for AAPL:
Pie chart shows revenue earned per region for AAPL:
From the pie charts above it's clear that AAPL earns the majority of their revenue in the Americas (42.4% of revenue infact). Europe brings in around 22% of revenue and China just behind Europe with about 20% of revenue for AAPL. Below the pie chart shows revenue from the various products sold or services delivered
From the pie chart above it is clear that the iPhone is by far the biggest contributor to AAPL's revenue. As mentioned in our introduction this was the breakthru product for the company. 57% of third quarter revenue was made up by the sale of iPhones. All their other products including services made up the rest (around 43%). Interesting to note services is actually the 2nd biggest contributor to their third quarter revenues, bringing in 14.1%. How much smaller would AAPL have been if it was not for the iPhone?
Below we will take a look at a few of AAPL's financial ratios and then provide a valuation based on AAPL's current financial results.
Below we will take a look at a few of AAPL's financial ratios and then provide a valuation based on AAPL's current financial results.
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A few financial ratios for AAPL (calculated using our Financial Ratios Calculator):
- Debt to Equity Ratio: 1.52 (more than 2 shows high levels of financial leverage).
- Current Ratio: 1.35 (A measure of liquidity. Less than one signals possible trouble in paying off current liabilities).
- Quick Ratio: 1.33 (Another liquidity measure. Shows how much in liquid assets is available to cover current liabilities or short term debt).
- Return on Assets (ROA): 2.80%
- Return on Equity (ROE): 7.03%
- Net Profit Margin: 19.24%
- Dividend Yield: 1.84%
Valuation:
Based on AAPL's current financial results we value them at between $118 and $118.26. We therefore feel that at it's current price it is close to being fully valued. AAPL is still a great company and investors currently holding it should continue to do so as we see no reason for selling. Those looking to buy should take advantage of any dips in the share price below the $118 a share.
For South African investors, please remember exchange rate movements will have an impact on the value of your AAPL shares when the value is calculated in Rand terms.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question. Note this is not a binding valuation and investors should do their own research before investing in a specific share. Southafricanmi.com cannot be held liable for any losses incurred, We would accept donations on profits made though ;)
For South African investors, please remember exchange rate movements will have an impact on the value of your AAPL shares when the value is calculated in Rand terms.
We use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question. Note this is not a binding valuation and investors should do their own research before investing in a specific share. Southafricanmi.com cannot be held liable for any losses incurred, We would accept donations on profits made though ;)
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