Numbers analysis: Apple (APPL)

Apple designs a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, among others. Apple’s products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services. Apple’s products are distributed online as well as through company-owned stores and third-party retailers. The company generates roughly 40% of its revenue from the Americas, with the remainder earned internationally.

Description taken from www.nordnet.se

I decided to look into the FAANG (Facebook, Amazon, Apple, Netflix and Alphabet) companies. Googles growth turned out better then expected while the price was reasonable. Link to my other post. https://thedollarmillionaire.com/2020/08/numbers-analysis-alphabet-googl/
Lets have a look at Apple since they recently released a new phone, the Iphone 12. I’m a big fan of tech but I haven’t used Apples products since Iphone 1.

Charts

10 year weekly chart
1 year daily chart

Statistics

The numbers analysis below is the first step in Rule 1 Investing by Phil Town. In his book Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! (no affiliate) he writes about his investing philosophy which centers around four key principles he refers to as the Four M’s: Meaning, Moat, Management and Margin of Safety.

The first requirement is an average annual growth rate of at least 10%, the past 10 years, in the ROIC (Return On Invested Capital), Sales, EPS (Earnings Per Share), Equity and Cash Flow. The average 5 year and 1 year growth rates should also be above 10%. High growth rates suggest a sustainable MOAT.

Next step is to analyse the the Four M’s: Meaning, Moat, Management and Margin of Safety.

The aim is to find a fantastic company, with a great track record, to invest in for at least 10 year. The expected average yearly return is at least 15%. This is used in the calculations. With an investment of 100 USD and a yearly return of 15%, 100 USD will have increased to 405 USD in 10 years time because of interest-on-interest or compound interest.

Year20112012201320142015
ROIC
Sales (MUSD)108249156508170910182795233715
EPS (USD)0.991.581.421.612.31
Equity (MUSD)76615118210123549111547119355
Operational cash flow (MUSD)3752950856536665971381266
P/E
Year20162017201820192020
ROIC19.62%17.21%19.37%20.29%23.71%
Sales (MUSD)215639229234265595260174274515
EPS (USD)2.082.32.982.973.28
Equity (MUSD)1282491340471071479048865339
Operational cash flow (MUSD)6623164225774346939180674
P/E13.6716.7519.0218.935.52

ROIC rates gurufocus.com. The rest are from macrotrends.com

Growth Rates

Yearly average10 year5 year1 year
ROIC20%24%
Sales Growth Rate11%6%6%
EPS Growth Rate14%12%10%
Equity Growth Rate-2%-16%-28%
Cash Flow Growth Rate9%5%16%
Growth rates x 2Average P/EMedian P/EAverage between the high and low P/E
P/En/a21n/an/a
Calculated future price in 10 yearsn/a56n/an/a
Calculated Pricen/a14n/an/a
Margin of Safety (50%)n/a7n/an/a
Due to negative Equity growth rates the calculations are bad. I’m just going to calculate on of them.

Current price: 114,7 USD

To be considered for further analysis here, as a growth stock, the requirement is that the 10 year yearly average growth rate is at least 5% in all five categories. They are not. The numbers do look good except for the Equity growth rates which are negative. I haven’t looked into why. I will not buy Apple as a longterm investment at this point.

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