Apple Inc. (AAPL) - Fairly Valued With Moderate Growth Prospects
Apple shares moved -29.3% over the last 52 weeks, with a high of $182.94 and a low of $125.87. During this time, the stock lagged the S&P 500 index by -8.4%. Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The large-cap Technology company has 164,000 full time employees and is based in Cupertino, CA. Apple has returned a 0.7% dividend yield over the last 12 months.
A Pattern of Improving Cash Flows With an Upwards trend:
| 2019-09-30 | 2020-09-30 | 2021-09-30 | 2022-09-30 | |
|---|---|---|---|---|
| Revenue (MM) | $260,174 | $274,515 | $365,817 | $394,328 |
| Revenue Growth | n/a | 5.51% | 33.26% | 7.79% |
| Gross Margins | 37.8% | 38.2% | 41.8% | 43.3% |
| Gross Margins Growth | n/a | 1.06% | 9.42% | 3.59% |
| Operating Margins | 24.6% | 24.2% | 29.8% | 30.3% |
| Operating Margins Growth | n/a | -1.63% | 23.14% | 1.68% |
| Earnings Per Share | $2.97 | $3.28 | $5.61 | $6.11 |
| EPS Growth | n/a | 10.44% | 71.04% | 8.91% |
| Free Cash Flow (MM) | $58,896 | $73,365 | $92,953 | $111,443 |
| FCF Growth | n/a | 24.57% | 26.7% | 19.89% |
| Capital Expenditures (MM) | -$10,495 | -$7,309 | -$11,085 | -$10,708 |
| Net Debt / EBITDA | 0.72 | 0.92 | 0.73 | 0.72 |
A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:
Compared to the Technology sector's average of 26.5, Apple has a trailing twelve month price to earnings (P/E) ratio of 21.2 and, based on its EPS guidance of 6.77, an expected P/E ratio of 19.1.
The firm's price to earnings growth (PEG) is 2.33, which indicates that it is overvalued in terms of its expected rate of earnings growth.
Apple's price to book (P/B) ratio is 40.8 compared to its sector average of 5.57. The company is likley overvalued in terms of its net tangible assets. As of the date of publication, the company's shares are trading 520.1% above their fair value as expressed by Benjamin Graham's formula:
√(22.5 * TTM earnings per share * book value per share) = √(22.5 * 6.11 * 3.178) = $20.9
Apple Has an Analyst Consensus of Strong Upside Potential but a Small Amount of Insider Shareholders:
41 analysts are following Apple and have set target prices ranging from $122 to $214 per share. On average, they have given the company a rating of buy. At the current price of $129.61, AAPL is trading -26.55% away from its average analyst target price of $176.45 per share, implying an analyst consensus of strong upside potential for the stock.
The company has a very low short interest since 0.8% of the company's shares are tied to short positions. Institutions own 60.9% of Apple's shares, while the insider ownership rate stands at 0.07%. The biggest shareholder is the Vanguard Group, Inc. with a 8% stake in the company worth approximately $164,913,030,135.
