Analysis of Apple

3308 WordsOct 5, 201014 Pages
TABLE OF CONTENTS 3 Apple – An Introduction 3 Macroeconomic Trends 4 Technical Analysis 5 Fundamental Analysis 8 Analysis of Financing Activities 8 Investments and Capital Budgeting Decisions 10 Industry Analysis 11 Performance Analysis APPLE INTRODUCTION Established in 1976, Apple ignited the personal computer revolution with the Apple II and the Macintosh. Today, Apple designs, manufactures and markets personal computers, portable digital music players and mobile communication devices as well as related software, services, peripherals and network solutions. Apple sells its products worldwide through its online stores, retail stores, direct sales forces and third party distributors to its core customers—consumers, educational…show more content…
Financial leverage (measured by the equity multiplier) Over the last three years, Apple’s profit margin as well as its efficiency at utilising shareholder equity is increasing—both very positive indicators of a company’s health and potential. However, Apple’s asset turnover has decreased. This could be due to Apple’s accumulation of assets from extensive R&D, a core yet inevitable pillar of its business strategy. Apple should strive to raise this figure in 2009. Despite this, Apple’s return on equity is healthy and on the rise. LIQUIDITY 2008 2007 2006 Current Ratio 2.462 2.361 2.252 Although Apple’s current ratio fell between 2005 and 2006 as current liabilities increased possibly due to increased R&D costs, in 2007 Apple’s current ratio is increasing. This is a healthy sign for Apple as it is better able to repay its current liabilities without selling its inventories. Trailing P/E (ttm) 18.34 Forward P/E (fye 27-Sep-10) 14.80 RELATIVE VALUATION Apple’s high trailing P/E ratio indicates that investors see potential and have confidence in the stock, thus moving prices higher. However, investors must consider if this high premium (the high stock price) is justifiable to its growth potential. As the forward P/E ratio is lower than the trailing PE ratio, this suggests that Apple’s future growth potential is not as optimistic, especially in the current economic turmoil. ANALYSIS OF FINANCING ACTIVITIES CAPITAL STRUCTURE

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