Stock Valuation and Analysis for Apple Inc. example

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Stock Valuation and Analysis for Apple Inc.

Apple Inc is an American multinational technology corporation with headquarters in

California. It was established in 1977. The Company designs, manufactures, and markets mobile communication and media devices iPhone and iPad, personal computers Mac, portable digital music players iPods, the Apple Watch smartwatch, and the Apple TV digital media playeк and sells a variety of related software, services, accessories, networking solutions, and third-party digital content and applications. Apple is the world's largest information technology company by revenue, the world's largest technology company by total assets [1] and the world's second-largest mobile phone manufacturer [2]. Apple’s fiscal year 2017 runs from September 25, 2016 through September 30, 2017 [3]

Apple has enjoyed a solid earnings history, reflected in a strong stock price, which has just hit its all-time high of more than 130 USD per share. It has soared about 8% since the company reported better-than-expected Q1 financial results. Revenue set a new record of $78.4 billion, which is $1 billion ahead of the average analyst estimate. Earnings per share also hit a record at $3.36, compared to $3.28 a year before. Moreover, Apple is widely believed to be working on a serious iPhone upgrade in 2017. This makes investment into company’s stock very attractive. However, before investing major financial indicators need be calculated and analyzed.

The P/E ratio measures company’s current stock price in relation to its earnings per-share. And it is calculated, therefore, as Market stock price divided by Earnings per share (EPS) ratio. It shows the number of years it takes for the company to earn back the price investors paid for the stock. It also shows how much investors are willing to pay per dollar of earnings. A high P/E indicates that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. A low P/E suggests either that a company is undervalued or that the company is doing much better compared to its past trends. It is always useful to compare PE ratio with the industry and even other industries to get a deeper understanding of the investment opportunities and risks. Since the iPhone launch Apple’s PE has been slightly ahead of its market share gains with product introductions, though it has been seriously fluctuating. Current PE ratio is about 15.9, which is quite lower than an industry average of about 20. This means that the company stock is not overvalued yet. PE has been consequently growing since 2015, which means that investors anticipate higher growth in the future. EPS ratio is quite volatile and has recently dropped. Thus I would still invest in Apple Inc, especially if considering long-term investment, though I should not wait too long, as, to my mind, in the near future stock price cutback is possible.

Market capitalization shows total market value to buy the whole company and is also related to market share price, as it is calculated as share price multiplied by the …

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